Risk Commentary

Innovation – Caution on technology risk

Audio post on the risks in tech implementation, so common in innovation.

Free Online Course: Innovation – How Can My Organization Get Started?

Innovation: Online Course Launch

ATTENTION INNOVATION LEADS
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So many industries and sectors are compelled now to introduce innovation to the organization, but how to get started? This free 5-part series gives practical answers to the questions:

• How can my organization find the time to do innovation?
• Am I ready to be the Innovation Champion?
• Is brainstorming the complete innovation process?
• Why do innovation tech applications often fail or under-deliver?
• Will skeptical employees ruin our chances for innovation?

Enterprise Risk Management and Board of Directors

What is the role of the Board of Directors with regard to Enterprise Risk Management? I recently addressed the Board members of Island Health, our local health authority, to answer this question.

The Board has already been given advice by the Healthcare Insurance Reciprocal of Canada. HIROC characterizes health authorities as “high reliability” organizations, meaning that any particular failure can have much larger catastrophic effects.

I suggested the following Board duties:

1. to review the rigour, quality and efficacy of the enterprise risk management regime itself;
2. to review the content, i.e., results of the risk assessment process, as applied to strategic plans – the risks that were identified; the mitigation plans created;
3. to ask critical questions regarding any element of the risk management practice, make suggestions, advise and guide the executive.

Similar to audit, the Board must maintain its independence. Unlike audit, which uses specific criteria and checks for compliance, each Board member formulates questions and criticism by drawing upon his or her unique individual background and expertise.

Eventually, the risk culture should mature so that a common understanding is developed among management, staff, and the board itself of how corporate values and risk ownership are understood and applied.

ERM: Solve Business Problems

Enterprise risk management —  correctly implemented — has an immediate practical benefit: to solve chronic and intractable business problems.

That might sound surprising, as many conceive of ERM as a compliance exercise, with purported eventual benefits, such as reduced volatility, managing strategic risk and lowering the cost of capital. But the value should be evident right away. How does ERM solve chronic and intractable business problems? Only if there is a very sharp, comprehensive and rigorous risk identification and assessment process. The trouble is that most embarking on risk ID use either a conventional approach (limited to, say, hazard risk, or “exposure to assets”) or use an ad hoc, informal approach, with no guidelines.

The challenge of developing high quality risk information (see my pdf) is the first concern when designing an ERM program. If one pays attention to that, then risk information is transformed magically from a heap of re-hashed issues into an incisive and insightful analysis of the most critical business problems.

I have experienced this time and again with clients. Once the rigour and structure is properly introduced into the exercise, the chronic difficulties which had always escaped definition and proper analysis suddenly come to light.

The end result is people have much more confidence in their ability to manage the business at hand. They now see and understand previously undetected and unsuspected underlying risk, and are prepared to fix these conditions and move the organization forward.

Performance Management and ERM

Performance managmement plan as context for risk ID
“A performance management plan is a set of target measures against which actual results achieved by employees are compared. If the system is well designed, it forms a good framework for risk assessment. We can ask, “What is the risk that performance measure X will not be attained?” But this assumes that the target is meaningful.”
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ERM books selected as Laval University course texts

“Solving the Enterprise Risk Management Puzzle: Secrets to Successful Implementation” and companion volume  “Enterprise Risk  Management Tools and Templates” have been selected as course texts for Laval University’s ERM course ASR-4004 Gestion intégrée des risques en entreprise.

Relationship between Audit and Risk Management

based upon notes taken from Ch. 7 of the RIMS text Enterprise Risk Management, edited by Michael W. Elliott, published 2013 by The Institutes.

The Nature of Controls

According to the text, controls are used to assess whether the organization’s actions are the ones expected; to check that the organization’s processes are functioning as intended. Originally connected with detecting errors and fraud, they are now related to organization’s goals, financial reporting and compliance.
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Consulting For Lean Manufacturing

In my last post on Lean Manufacturing, I said that there was a broader agenda at stake — namely, the survival of firms in the era of the decline of western manufacturing. Consultant Bill Chambless expresses a similar thought in his book Quantum Profits. He posits that the mastering of short-run customized production is the key to economic recovery.

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