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:

1. 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.

2. 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.

3. 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.

4. 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.

5. 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