How to manage a successful enterprise risk management program
Many initiatives within an organization are supported by steering committees, committees that decide on the priorities or order of the business. Audit, IT and EHS (Environment Health & Safety) are just a few common examples. However, not all steering committees are created equal. They can take on many different shapes and forms based on need, initiative scope, subject-matter expertise and company culture, just to name a few.
Generally, a steering committee’s purpose is to ensure that the initiative has the support to be effectively integrated into the organization. Committees are formed to ensure the success of the initiative, as well as the success of participants, by effectively sponsoring, opening opportunities and tearing down walls or barriers that may derail the initiative. But, it is not uncommon to see a steering committee that has evolved into an “update session” with little change or influence happening in the organization.
Enterprise Risk Management, or ERM, is no different in this regard. It requires an active and engaged committee of sponsors who ultimately own the success of the initiative being adopted by the organization or not. In other words, they are your support team for success.
The difference between success and failure
So, what makes the difference? Why are some steering committees more effective than others?
Well, as you can imagine, there are a myriad of reasons but below I offer a few points I’ve learned over the years that can help you successfully use your steering committee to get your initiative moving and adopted.
1. Select the Right Members
This may seem like common sense but in practice can be difficult. Some questions that have emerged over the years are:
- Who has the right authority and influence where your initiative is targeted?
- Are these individuals available and have the time to commit to the initiative?
- Have you clearly defined the specialized skills you need on your committee?
- Do the individual personalities work in favor of the initiative? (Not “does everybody get along”, but rather is there enough objectivity, enough diverging opinions but with the right balance to ensure issues are clearly vetted and aligned to execute.)
- Are they willing to sponsor the initiative? Are they committed to seeing the initiative succeed?
- How have they performed on past steering committees? Does this work in your favor? If not, can they be influenced to participate as you need them to?
These as well as other questions should be considered in order to start off with the right members. Having dedicated members who are supportive and aligned with the initiative can make a big difference in the outcome.
Unique to ERM steering committees, member selection should follow the order of your “risk groupings,” i.e., how do you define the large buckets of risk(s)? A natural and common order of risk groupings in the industry are: Hazard, Strategic, Financial, Operations and Legal/Regulatory. With the varied and complex issues ERM professionals address, it is important that a subject-matter expert in each of these categories be represented for each of your risk buckets. This ensures that a fair number of the questions above are addressed, such as are they aligned with the target? Do they have a vested interest in seeing the initiative through, etc.? By aligning executives with the specific responsibilities where your company risk is arising you stand a better chance of identifying well-suited committee members.
2. Develop a Charter, Vision and Mission for your ERM Steering Committee
ERM steering committees should have clear charters, vision statements and mission statements.
These documents should become living, breathing documents that are used to govern the activities of the committee. Further, it is essential to draft these documents using clear and concise language – so that the messages can be easily understood and digested through the company.
For example: Can each of your committee members answer the following question with a single statement:
What does the ERM committee do?
Answer 1: The ERM steering committee works to evaluate, quantify, develop and integrate controls to balance the risk/reward equation of the organization.
This statement is short, clear and concise and provides an entry-level knowledge of what the ERM steering committee is about. Further, it allows for consistent communication of the committee’s purpose across the organization. Done correctly, the words of the charter, vision and mission will start to bubble up all over the company in dialogue, emails, presentations etc.
Otherwise, without a clear statement of purpose through the charter, vision and mission you may end up with this response:
(OR) Answer 2: Well, we get together quarterly and talk about risks and stuff and there are projects, like better regulatory knowledge.
Obviously not preferred, but how many times have you heard this in your career?
So, not only do you have to bring clarity of purpose through the charter, vision and mission, you must also repeat these statements often with your committee members. This will ensure a greater likelihood that they can clearly articulate their role and the role the committee plays within your organization.
Another important point is: Do not write these documents for the committee! Your job is to facilitate the discussions and help the committee draw the necessary conclusion(s) through your expert guidance. This can be a painful process, and I’ve been through as many as 30 edit sessions to reach an agreement – but it is critical. Although laborious at times, it is time well spent in that it ensures the committee “owns” the charter, vision and mission and are engaged in the process from day one.
3. Be an action-orientated steering committee
So, many steering committees get mired in discussion and “what if’s” that action ceases to exist. As the committee leader, you play a critical role in driving the committee and its actions.
First, you should send out pre-work before meetings. Develop the topics, readings, things you would like the committee to do some pre-think on etc. This gives them an engagement task that will serve as a central focus for the meeting. This significantly improves the ability to stay on track.
Second, clearly define the agenda and set time limits for each topic. Make it clear which parts of the agenda are discussion times (and limit the time) and which decisions must be made during the meeting. Most of the meeting time should be spent making decisions. Stick to the timeline and keep the agenda moving.
And lastly, provide homework at the end of each meeting. This affords you an opportunity to engage with each committee member individually outside of the committee meeting and gives the sponsor real and meaningful work to help move the initiative along. With more face time, you can clear up misunderstandings, take a pulse check on how each member is viewing the progress and use that time to influence.
4. Coach up!
Most executives I have worked with over the years want to see the initiative succeed and certainly want a return on investment. So, typically the want and desire to sponsor and support is there, but the understanding and language of the subject matter may not be.
For this reason you have a responsibility to “coach up.” This means educating the committee members on the subject matter in a way they can understand. Provide them with communication templates and give them the language to express the importance of the initiative(s) and its value to the organization. Remember to talk in terms of value creation or value preservation. You can also script the sponsors support by asking them to call a person and communicate a certain message, or help draft language for them to use in there communication documents, or help build a piece of a key presentation they are doing.
Provide committee members with the knowledge, talking points/language and the direction and watch your initiative soar!
Troy Hackett is the director enterprise risk management at Wilbur-Ellis Company and has worked extensively in the ERM space. Hackett is a graduate of Central Missouri State University in Warrensburg, Mo. with a degree in Industrial Safety and went on to earn his M.B.A. at Brenau University in Gainesville, Ga. Hackett also holds certifications from the Risk and Insurance Management Society and the American Society of Safety Engineers.