The past 24 months have seen a number of man-made and natural disasters bring risk management demands to the forefront of executives and board directors. Whether these have been natural disasters, such as the Japanese Tsunami or man-made disasters, such as the Gulf of Mexico oil spill, fat-tail disasters have created a renewed interest in enterprise risk management (ERM) practices.
Although demand for these practices and the discussion level for their use is high inside the C-suite of many corporations and private enterprises, studies have shown that there is a discontinuity of both talent and practice in Western economies. So, how can organizations ensure a culture of risk awareness is put into place?
“Get a commitment from senior management that encouraging a risk culture throughout the organization is a priority. Put together a communication strategy that can include newsletters, lunch-and-learns, speaking at head office and regional business meetings. Look at the gaps or challenges in your Risk Appetite and Material Risks for ideas on where to focus your efforts” says Diana L. Graham, Chief Risk Officer at ResMor Trust Company.
marcus evans spoke to Ms. Graham, before the forthcoming 2nd Annual Enterprise Risk Management Canada Conference, October 2-3, 2012 in Toronto, Canada. Within her role at Resmor Trust, she has built a successful internal risk culture involving individuals from every level of the organization. Key to this success is developing transparency across these risk buckets to enhance communication and minimize potential gap risk from falling through the cracks.
“Ideally, risk management would be included as a business stakeholder in budgeting decisions when areas seek to streamline operations resulting in the elimination or weakening of controls” says Graham.
“Risk management should be an influencing stakeholder regarding certain compensation decisions, i.e., risk management targets in areas outside risk management and weighting of the risk management segment in balanced scorecards. Additionally, risk management should sign-off on all new product/new business decisions” says Graham.
Companies in Canada are in a unique position because they are in various levels of implementing enterprise risk strategies within their organizations. The key to the success of establishing an enterprise risk management (ERM) framework lies within the creation of risk appetite and tolerance levels across risk buckets.
“Canadian companies tend to be more conservative than those in the US, so there may be more of a foundation in place across the organization. Generally, I have found that there is a “healthy tension” among stakeholders in Canada as opposed to that found in the US in building a risk culture” says Graham. While the need to incorporate the Board of Directors within the ERM framework is a global challenge, Canadian companies’ cultures are more open to implementing risk structures and processes at every level of the organization.
Diana Graham has been Chief Risk Officer at ResMor Trust Company since January, 2010. Prior to this, she worked on behalf of the FDIC in the closure of US banks, and in senior risk management positions in large US and Canadian financial institutions. Ms. Graham received her MBA from New York University, Stern School of Business.
For more information, please contact Michele Westergaard at 312-540-3000 ext. 6625 or Michelew@marcusevansch.com.
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