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Reconciling blast craters and ERM

Posted by Marc Laplante on September 14, 2010 at 15:00 in Opinions
There is a gap, perhaps more adequately described as a CHASM, that separates what risk managers are trying to do and what is happening in the asset intensive industry. Up from that chasm emerge devastating events that kill people, devastate the ecosystem, and generally slow economic growth. Do I really need a list of those events or should I just point out what's happened in San Bruno California over this past weekend? Reading that should evoke thoughts of other pipeline explosions, underground mine explosions, Gulf of Mexico explosions, refinery explosions...

Anyway...

So what does this have to do with sustained profitability? The Institute of Internal Auditors, in the ERM Integrated Framework (Sept. 2004) states:

"Value is created by informed and inspired management decisions in all spheres of an entity's activities, from strategy setting to operations. Entities failing to recognize the risks they face, from external or internal sources, and to manage them effectively can destroy value - in absolute or relative terms - for shareholders and other stakeholders, including the community and society at large."

So the internal auditors claim that they have all of this framed into their "ERM" so why are people still losing their lives? Where is the value they talk about when there is oil washing up on shore or blast craters in the middle of the suburbs?

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  • Sonia Jaspal October 8, 2010 13:59
    Very valid points put on the post. Somewhere ERM becomes a document rather than a proactive measure to mititgate risks. Those gaps remain due to lack of focus on the practical stuff by AC. I would say most of the AC members would not understand the practical stuff at the detailed level and the devil is in details.

    Sonia
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