Dave Ingram’s what ERM is and is not

I like Dave Ingram sees as ERM

• An approach to assure the firm is attending to all risks;
• A set of expectations among management, shareholders, and the board about which risks the firm will and will not take;
• A set of methods for avoiding situations that might result in losses that would be outside the firm’s tolerance;
• A method to shift focus from “cost/benefit” to “risk/reward”;
• A way to help fulfill a fundamental responsibility of a company’s board and senior management;
• A toolkit for trimming excess risks and a system for intelligently selecting which risks need trimming; and
• A language for communicating the firm’s efforts to maintain a manageable risk profile.

I like what Dave Ingram sees as ERM is NOT:

• A method to eliminate all risks;
• A guarantee that the firm will avoid losses;
• A crammed-together collection of longstanding and disparate practices;
• A rigid set of rules that must be followed under all circumstances;
• Limited to compliance and disclosure requirements;
• A replacement for internal controls of fraud and malfeasance;
• Exactly the same for all firms in all sectors;
• Exactly the same from year to year; nor
• A passing fad.

What ERM Is… and Is Not…

Read Full Post »

ERM survey by Journal of Accountacy

The results of a recent survey appear in the Journal of Accountancy. Normally you wouldn’t find me reading anything of the sort but it was titled “ERM: Opportunities for Improvement” so how could I resist?

Their survey supports quantitatively what many unemployed risk practitioners already know and what an EVP once said to me, “Trevor, risk management is important; we just don’t have time for it.” To paraphrase my fellows bloggers at Riskviews, risk management is the third priority after generating revenues and profits.

Back to the survey, the data reports perceived barriers to ERM implementation included the existence of competing priorities within the organization, insufficient resources to devote to an ERM implementation, a lack of perceived value (for an ERM program), lack of board or senior management leadership for ERM, and the perception that ERM translates into added bureaucracy for the organization.

See the original article by Mark S. Beasley, Bruce C. Branson and Bonnie V. Hancock to view these responses in tabular form and read more about the survey.

Finally, as an ERM practitioner and non-accountant who was briefly an internal auditor, I am not a big proponent of their suggestion that internal auditors should be more involved in ERM initiatives (other than auditing the ERM processes) – because I  think the auditor perspective is often too control-focused – but this is the Journal of Accountancy after all.

Enjoy the article.

Read Full Post »