Coach: Bridging the gap

Program offers three-year immersion of ERM

By Michael J. Moody, MBA, ARM  ERM

Enterprise risk management (ERM) has become the millennium's new buzzword. Actually, significantly more than a buzzword, it has moved from an emerging business discipline to an essential one. As a result, corporations of all sizes are now beginning to develop ERM programs that are sometimes embedded into their organizations' overall strategic planning process. And whether these programs are being established as a result of an internal concern of the board, or from an external source such as a regulatory body or rating agency, ERM has been increasing its visibility over the past 10 to 12 years.

Despite the success that some firms have been able to attain, at this point, not all boats are rising at the same rate. In fact, on a percentage basis, far fewer organizations have made any real progress towards their ERM goals. As with any new management discipline, there are a number of reasons for this slow initial progress.

ERM design—an overview 

According to Larry Baker, managing partner of the ERM Coach^©, one of the major roadblocks has to do with the amount of available information to assist companies in their design and implementation phases. "It's not because of a lack of information," Baker points out. "It's just the opposite, really." Today, there is an "information overload" with regard to available resources regarding ERM. Over the past few years, more than half a dozen trade associations and special interest groups have published ERM frameworks, each with its own proponents and detractors, depending on who authors it. For Baker, "This is the real momentum killer." Corporations are just unsure how to proceed, he says.

He notes that any organization that desires to have a sustainable ERM process today most frequently looks to outside assistance. If they wish to seek assistance from the outside, Baker says, this typically takes one of two forms. The first form is primarily a self-taught method that may include such things as:

• Personal reading

• Research subscriptions

• Attendance at conferences and seminars

• Networking

Any and all of these methods can be utilized; however, at the end of the day, these are generally considered "low cost/low value," since it is a time-consuming process that may or may not provide the specific information needed. Additionally, for the most part, it depends to a large degree on the personal interest of the person charged with the responsibility.

At the opposite end of the spectrum is retaining the services of either an ERM specialty advisory consulting group or hiring a full-time consultant. Assistance from either of these can provide good results and they are considered as "high value." But regardless of which of these two options is considered, they are "high cost" and are frequently out of range for all but the largest organizations.

Many companies are interested in moving forward with ERM because they can see the advantages of holistic risk management. However, as Baker notes, the "high cost/high value" option is just not an option in the current economic climate. Further, the "low cost/low value" option usually "does not meet the organization's needs for practical, direct and proven ERM guidance." This then leaves a void in available options between the two extremes of low cost/low value, and high cost/high value, one that "ERM Coach" is working to fill.

In 2008, CFR, Inc., Chairman Jack Allen indicated that his Tulsa, Oklahoma, firm was providing specialized enterprise risk management consulting services to clients for a fee. Allen says, "We took a look at the current status of enterprise risk management and realized it was time for a dramatic shift in the way ERM consulting should be delivered. ERM consulting gigs were producing very good project-based results but, all too often, things went back to business as usual once a consulting project was done." They also found that companies that created a role for an "Enterprise Risk Management Champion" within the organization seemed to make much better strategic, organizational, financial and reputation type decisions. Yet the financial and time commitment to create and maintain ongoing ERM functions seemed overwhelming for all but the largest of organizations.

Coaching assistance for the masses

The ERM Coach program is specifically designed to provide organizations with a cost-effective method of ERM implementation that "combines the benefits of consulting and a 'do-it-yourself' resource into one program," states Baker. "Our approach utilizes our significant, hands-on experience and comprehensive coaching model to guide companies through a step-by-step implementation process." The coaching program has been developed to leverage the experience of the coaching staff to inform, mentor and guide exclusive members in various stages of ERM process development.

Allen notes that ERM Coach has taken three years to develop so that "we can now provide a cost-effective solution to training, measuring and mentoring enterprise risk management leaders for most companies." One of the key aspects of the ERM Coach program, Allen says, "is it helps match responsibility, accountability, authority and rewards to produce the reality of true ERM."

The program is provided in a group setting that is made up of five to 10 corporations' ERM champions. By providing group consulting, the expense can be kept at a cost-effective level. In essence, the ERM Coach program encompasses a three-year format. During the initial year, the program provides four one-day, group sessions. The four sessions include dynamic instruction from the ERM Coach on how to implement ERM in an organization and include the following:

• Session 1 - Current State Assessment of Risk Management Across the Organization

• Session 2 - Future State ERM Goals and Work Plan Development

• Session 3 - Work Plan Execution/ERM Implementation

• Session 4 - Developing a Sustainable ERM Framework and Process

During this period, the group will deal with precise topics such as the identification of specific opportunities for improvement of the company's risk management/ERM process. Baker also notes: "Guidance in developing personalized ERM work plans is provided to give clear directions for moving an organization toward its desired level of ERM sophistication." He also says, the group participants can access practical ERM knowledge as well as time-tested tools and materials to assist in implementation. In between the four scheduled sessions, each company will establish and execute a strategic plan for ERM implementation. By design, these will vary by the specific needs of the organizations. In addition to the networking opportunities presented at the meetings, periodic conference calls are used to address specific challenges and successes of the participants.

First things first   

As Baker points out, the array of ERM frameworks and the overwhelming amount of ERM information have resulted in some companies' lack of meaningful progress in implementing ERM. However, he also notes that, for the most part, many of the current crop of frameworks center around a risk management process, so this is naturally where the ERM Coach program begins as well. Each firm that is participating in the program must select an "ERM Champion" who will oversee the implementation within the individual company. It will be the Champion who attends the sessions and is charged with the responsibility of progressing the ERM agenda at his or her organization.

The first session centers on the concept of evaluating the current state of risk management/ERM throughout the company. This is designed to assist the company in determining where they are today with regard to the effectiveness of their risk management process. The second session focuses on developing a clear picture of where the company wants to take ERM in the future. By comparing the current state with the future state, the Champion is able to develop a clear roadmap for successful ERM implementation. The third and fourth sessions provide practical ideas on how to execute the ERM roadmap developed previously.

One of the most practical starting points for ERM implementation is to identify and communicate the company's top strategic risks to the board. "While many organizations may think they know their current strategic risks," based on Baker's experience, "nothing could be further from the truth." Once the Champion begins the actual risk identification process, he or she soon finds out just how  wrong this assumption is. This initial step of the risk management process is designed "to identify and to some degree prioritize the firm's eight to 10 biggest risks."

Once the risks are identified, many executives get stalled at this point of the ERM implementation process due to the overwhelming size and complexity of the risks. The ERM Coach program helps the Champion understand the importance of quickly moving into the risk analysis stage of the risk management process. Then, management has the necessary information for making decisions and implementing action plans as needed. As value is demonstrated, management is far more supportive of the ERM Champion as they move forward with the execution of the ERM roadmap.

Conclusion

The goal of ERM Coach is pretty simple—helping corporations take a more "do-it-yourself" approach to ERM implementation while leveraging the Coach's expertise. According to Baker, "The program is designed to allow the ERM Coach to educate, mentor, and generally provide tools and techniques that have proven successful over the years." He also indicates: "We do this in a way that requires minimal involvement from an outside consultant." Many of the popular frameworks tend to be conceptual with little guidance or practical implementation advice. The ERM Coach, by comparison, is a program that is devised to utilize a simplified ERM framework, so as to "be more practical and understandable than most."

Ultimately, corporate training for ERM will need to take a similar path to the ERM Coach program. Neither the low cost/low value approach nor the high cost/high value approach is meeting the needs of the majority of organizations. Some modified approach will be required so that corporations have the tools and techniques required to obtain the value of embedding ERM into the company's core decision-making processes and the corporate culture.

"The idea of coaching is not new," Allen points out. "Most of the world's great leaders and athletes have all had coaches and mentors help shape their success." And he says, "We developed an innovative way to help train and mentor ERM leaders within organizations because no one was filling this role, and often there was no real way for executives and board members to measure results." Agents and brokers should realize that suggesting programs like ERM Coach can also provide a great value-added service for their clients.