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Poole College of Management
Enterprise Risk Management Initiative

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Feb 1, 2012

Is it Necessary to Have a Separate Risk Committee?

A hot topic in risk management discussions within organizations is the debate about whether a separate risk committee is necessary for a company to have effective enterprise risk management processes. The authors of this Conference Board article believe “It depends.” The risk management process is a very individualized process. Organizations need to take a long look in the mirror to ensure that a separate risk committee would not create more unnecessary bureaucracy. By learning the business and its strategies more intimately, the organization can determine the risk environment of the firm at a higher level, which in turn will give insights into the necessity/requirement of having a separate risk committee.

Jan 1, 2012

Risk Committees

While most often the board of directors delegates risk oversight to the audit committee, increasingly boards of creating separate board level risk committees charged with that responsibility. This is particularly true for financial services firms, given requirements imposed by the Dodd-Frank legislation for larger banks to form separate risk committees. In an effort to assist companies who are considering the establishment of a board risk committee, Deloitte has organized a resource guide of ideas, recommendations, and specific tools. This resource will help assist those entities that will need to be in compliance with the Federal Reserve’s requirements developed to implement the provisions of Dodd-Frank. Although the guide is helpful for companies that must comply with the new Dodd-Frank regulations, it can be useful for any company that wishes to obtain more information on risk governance and oversight.

Oct 17, 2011

Compliance, Ethics and Enterprise Risk Management

Carlo V. di Florio, the Director of Office of Compliance Inspections and Examinations at the SEC spoke about the relationship between compliance, ethics and ERM. He made his speech at the National Society of Compliance Professionals (NCSP) National Meeting in October 2011. The speech outlined the importance of ethics in compliance and ERM exercises. It also presented ten elements of effective ethics, compliance and ERM programs. The speech also emphasized the need to clarify an organization's five lines of defense namely the business, key support functions, internal audit, senior management, and the board of directors.

Jun 1, 2010

Nine Hallmarks of Successful ERM

As organizations seek to strengthen their risk oversight, they are interested in learning from others about effective practices that ensure risk oversight provides strategic value. The Aon Global Risk Consulting report explored how ERM is being used, the extent to which it has been implemented and its effect on organizational goals. It provides an overview of nine distinguishing characteristics of successful ERM approaches. This report expands on the detailed results from the survey, including the point that ERM has continued to evolve as an accepted and required process to create value.

Sep 1, 2009

Effective Enterprise Risk Oversight: The Role of the Board of Directors

COSO's Effective Enterprise Risk Oversight: The Role of the Board of Directors is focused on aiding boards of directors in strengthening their enterprise risk oversight responsibilities. The current economic crisis has caused the role of the board of directors to become far more challenging than in the past. The thought paper highlights critical board responsibilities by using four specific areas in COSO’s Enterprise Risk Management – Integrated Framework that contribute to board oversight of enterprise risk management.

Apr 15, 2009

Importance of Risk Management Mindset

Many companies that were unprepared for the current economic situation have become hesitant to make decisions regarding the future. For companies to regain confidence in making these decisions there needs to be a realization that risk management models are only as good as the decisions that are made based on the models. As a result, the risk management mindset is just as important as the model. Companies can focus on their risk management mindset by re-defining risk to include a more integrated view of risk and constructing a new "risk architecture" that incorporates information external to the company and looks at interdependencies to help make better decisions and more successfully manage their risks.

Apr 15, 2009

Risk Culture of Companies

Risk culture is an area of risk management that has become a recent focus for many boards. Risk culture is the system of values and behaviors present in an organization that shapes risk decisions of management and employees. A first step to addressing the risk culture of an organization is a conversation among management and the board involving topics such as "tone at the top" effective communication, and appropriate incentives. A strong risk culture will take time to develop in an organization and its presence will mean that employees know what a company stands for, the boundaries within which it can operate, and that they can openly discuss which risks should be taken in order to achieve the company's long-term strategic goals.

Mar 1, 2009

Ten Practical Lessons for Risk Management

Recent events have uncovered significant deficiencies in the way risks are managed at financial institutions and many other companies. Research into these deficiencies shows ten practical lessons companies can apply to address current weaknesses and strengthen risk management systems. By wielding appropriate authority, gaining support from senior management, and thoroughly examining the models and incentive systems used, risk managers can greatly improve companies' risk management systems.

Mar 1, 2009

Key Areas of Concern in Corporate Governance

Strong corporate governance is essential for boards as they are positioned to lead the way in implementing measures that contribute to economic growth and sustainability. There are four areas of corporate governance the National Association of Corporate Directors (NACD) has identified as being the most important and of immediate concern: risk oversight, corporate strategy, executive compensation, and transparency. Within each area of concern, the NACD provides recommendations from their Key Agreed Principles to Strengthen Corporate Governance for U.S. Publicly Traded Companies document as well as addresses future challenges boards will face in improving governance practices in each area.

Dec 1, 2008

Aligning Risk Management and Executive Compensation

Boards of directors are charged with corporate governance tasks that include setting executive compensation and developing the corporation's strategic agenda in light of its risk tolerance. Using short-term performance metrics, like stock price or earnings per share, to determine executive compensation may encourage executives to make decisions that are not aligned with the corporation's strategic plan or overall risk appetite.