ERM at the Federal Reserve Bank of Richmond
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The Federal Reserve Bank of Richmond (FRBR) implemented an Enterprise Risk Management (ERM) system tailored for not-for-profit organizations. This approach emphasized the strategic alignment of risk management practices with the bank’s mission and objectives.
Key Points:
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Framework Design:
- ERM was implemented through facilitated assessments at the functional area level, ensuring risks were evaluated in terms of their impact on both functional and corporate objectives.
- Unlike private-sector ERM, which often focuses on financial metrics, FRBR emphasized judgment-based assessments aligned with organizational goals.
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Process Highlights:
- Risk assessments were facilitated by trained analysts to guide discussions, ensuring thorough data collection and consistency across functions.
- Risks were categorized based on likelihood, impact, mitigation, and trend, enabling a comprehensive view of potential threats.
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Reporting and Integration:
- Dashboards were used to summarize risk data at both functional and corporate levels.
- ERM integrated other risk disciplines, such as financial controls and IT security, to provide a unified enterprise-wide view.
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Success Factors:
- Strong leadership support, goal-oriented methodologies, and ownership at the functional level were identified as critical to the program’s success.
- The strategic focus was maintained by aligning ERM with broader financial and strategic planning processes.
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Challenges:
- Overcoming cultural barriers to reporting risks, ensuring employee engagement, and integrating ERM with strategic initiatives were significant challenges.
Conclusion:
FRBR’s ERM implementation serves as a model for governmental and not-for-profit entities. It demonstrated the importance of customizing ERM approaches to align with non-financial objectives, leveraging facilitated assessments, and fostering a culture of collaboration and transparency.
Original Article Source: “A Model for Not-for-Profit Enterprise Risk Management: ERM at the Federal Reserve Bank of Richmond”, Jack Dorminey and Richard Mohn, Journal of Government Financial Management, Spring 2007
