How to manage a successful enterprise risk management program
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?