Enterprise Risk Management Insights &

Transcript:Enterprise Risk Management Insights &:
Enterprise Risk Management Insights & Operationalization Prepared for the Committee on Finance & IT June 18th 2010 Background Key findings: The current state of ERM implementation Types of ERM program Organisation of ERM functions Operationalization of ERM Open questions Next steps About BMR Contents Background to the study A perfect storm ERM has been a topic of discussion and analysis since the mid 1990s – but economic turmoil has thrown risk management into sharper focus Regulatory developments – for example, the introduction of SEC Rule 33-9089 – are acting as a powerful catalyst for ERM adoption Management teams and Boards are under increasing pressure from regulators, investors and the media to demonstrate the effectiveness of risk management efforts – both in protecting shareholder interests AND in adding value By 2009, FERF had identified a gap in knowledge among FEI members – most of whom knew that they should do something about ERM, but weren’t sure exactly what to do | 4 Focus on practical implementation FERF and BMR agreed that an executive report was needed to help FEI members address the ’operationalization’ of ERM A steering group was formed, comprising Peggy Yocher of United Technologies; Joan Netzel of SunTrust Banks; and Prof Paul Walker of the University of Virginia, as well as BMR and FERF representatives Rather than review theoretical frameworks, it was agreed that the study should canvass ERM Managers to find out how ERM is actually being implemented on the ground and to identify trends, patterns and future directions that may be of value to FEI members It was also agreed that the principal focus should be upon ERM in non-financial companies | 5 Participants in the study Companies interviewed for the study have aggregate revenues in excess of $1.2 trillion and are generally global in scope They were predominantly Fortune 500 organisations or similar, on the basis that these companies are most likely to have well-developed ERM programs Personnel interviewed were typically either: ERM Directors Treasurers Strategy Directors Controllers In addition to these face-to-face interviews, we also carried out detailed reviews of approximately 15 more ERM programs | 6 Key findings 1. Current state of ERM implementation 2. Two types of ERM program 3. Organization of ERM programs 4. Operationalization of ERM Current state of ERM implementation | 8 Key findings 1. Current state of ERM implementation 2. Two types of ERM program 3. Organization of ERM