ERM Takes Steps to Choregraphing a Better Dance Between Risk and Strategy

Blog Post

ERM Takes Steps to Choregraphing a Better Dance Between Risk and Strategy

Thanks to all the members and guests who attended NeuGroup’s 2017 H2 Corporate ERM Group meeting on November 9-10 in Cleveland, Ohio, and to Parker Hannifin for hosting as it celebrates 100 years in business. Among the takeaways: Other companies that want to last for a century need to embrace a risk-based strategy. 
 
In broad terms, this meeting further cemented the belief that full integration of strategy and risk management should be the objective for members, a point that came through in almost every discussion.  You could argue that even having two names is not helpful because it helps enforce the separation. Achieving full integration will be a journey—one that needs to have a sense of urgency.  One analogy: think of integration as a smooth waltz rather than some clunky dance. Learning the steps won’t be easy, but it will help you avoid stumbling into value-killing risk. 
 
Here are some of the key takeaways from the meeting that you missed.
 
Seize the moment. The chief risk officer from a large regional bank presented to the group. He noted his journey to chief risk officer, providing a great example of being ready to seize the moment in a crisis.  He had built a lot of skills and was able to use them when called on, helping him play a crucial role in “righting” the bank in the aftermath of the mortgaged-backed securities meltdown.  Every risk manager will run into urgent, crisis-type situations.  You need to be ready to step in.  
 
“Beware of the middle.” He noted the importance, in creating a culture that takes risk management seriously, of addressing and attacking the “middle,” or the middle management level. This serves several purposes, including influencing lower levels of the company because of a trickle-down effect. He found if he did not get the middle on board would he would lose the bottom, as the middle promoted the bottom. This involves making clear that all employees have some risk they need to manage and to confront questions like “what does this mean to me; how do I change my behavior?” 
 
View blockchain as a risk management tool instead of an emerging risk. Caitlin Long, Chairman and President of Symbiont walked members through a primer on blockchain and why it should be seen as a risk-mitigation tool and not a risk. Blockchain, she argues, has the potential to reduce certain risks through better data, better audit trails, and better security. 
 
Companies do not recover from strategic losses. Dr. Paul Walker from St. John’s University, one of the newer ERM members, walked attendees through the importance of aligning strategy and risk.  He noted that in ten years, more than 40% of companies in business today will no longer exist. Anticipating, interpreting, and reacting to signals and noise is vital, he said. The discussion was filled with examples, ideas, and tools that could be used to have a conversation with your strategy team. Members shared risk tools they’re using; these tools are important as most strategic plans fail because risk has been underestimated. 
 
For more than two decades, NeuGroup has led the way in peer knowledge exchange for treasury and finance professionals. With an unrivaled network of 18 invitation-only peer groups, NeuGroup facilitates over 30 face-to-face meetings to inform actions, transform practices, and enhance careers for more than 400 members from across treasury and finance functions, covering multiple industries and global regions. Visit www.Neugroup.com for more information about peer groups and www.iTreasurer.com for content and news.
 
0