Chimera Global Services LLC
06
• Losses will happen regardless if I have an ERM processes in place
You can have early warning; and be prepared for them; and recover more quickly with a little resiliency planning; and you can mitigate the impacts to your reputation and brand.
There are countless examples of companies that have damaged their reputation through strategy failures or ethical lapses, impacting the demand for their products or services, as well as for their stock prices. This in turn can affect gross margin, capital costs and the discount rate applied to company valuation.
07
08
• There are too many competing frameworks / standards for ERM out there
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• It’s too hard to quantify a return on investment
Focus on the potential values; build a business case for it by breaking it down into smaller categories:
1. Shareholder value adds: positive public perception; improved credit rating or risk score; integration of risk results with operations
2. Avoided risks: reduced volatility through hedging or insurance products; reduced risk through incremental controls
3. Hard dollar savings: consolidation of risk infrastructure and processes; reduced insurance costs; reduced regulatory capital requirements
4. Qualitative benefits: improved risk transparency and awareness; improved risk management coordination and accountability; improved risk and financial statement metrics and elimination of siloed risk management activities
09
• I don’t see us going down the whole ERM road; but maybe part-way
Consider implementing “ERM-Lite”; test it on a prominent business unit with large financial risks and one with higher non-financial exposure such as strategic, reputation or operational risks.
Most companies practice risk management, but it's not very common to have all the elements of an ERM framework. Having and understanding that a framework even exists is half the battle. Companies can take significant steps to manage their risks without a fully defined ERM framework. People who don’t focus on risk on a regular basis or as a formal process might need to work a bit extra to get their heads around it.
10
• My risks are privileged information and I don’t want to share them with anyone
You can still provide risk transparency to others according to broad categories without getting into specific contracts, legal cases, projects, events, counterparties and products.