The ERM Process at Xerium Technologies Part 2
Synopsis:
Bonnie Hancock speaks with Fred Caloggero, VP of Audit Services at Xerium Technology, about the ERM process that he helps lead at the company. Many companies look at risk on a two scale plane, considering likelihood and impact; however, Xerium adds in the aspect of velocity – the speed of which a risk can be onset at a company. By looking at things like Key Performance Indicators and Key Risk Indicators, a company can be more aware of the velocities of various risks.
Mr. Caloggero also speaks of some of the difficulties that exist in starting an ERM process, which include assigning risks to individuals and the sheer volume of data that is produced during this time. How he handled these issues is addressed with this interview along with how he keeps updated on the risks assigned to certain people.
Key Points Discussed:
Risk Assessment Framework
Fred Caloggero, Vice President at Xerium Technologies, discusses the use of a three-factor risk assessment framework, which includes:
- Probability: Likelihood of the risk occurring.
- Impact: Consequences if the risk materializes.
- Speed of Onset (Velocity): How quickly a risk could occur, important for industries facing rapid changes or events.
Monitoring Risks with Indicators
- Key Performance Indicators (KPIs) are extensively used to monitor and mitigate risks by identifying early warning signs related to performance.
- Key Risk Indicators (KRIs) are less emphasized but overlap with KPIs to identify risks tied to operational and strategic goals.
- Xerium uses KPIs to backward map performance issues to potential risk events, integrating this into regular business monitoring rather than adding layers of bureaucracy.
Challenges in ERM Implementation
- Administrative Burden: Managing and updating a growing list of risks and ensuring accurate ownership of risks is resource-intensive.
- Involvement and Ownership: Shifting responsibility to risk owners through quarterly updates helps decentralize ERM tasks.
- Scope Creep: The risk list can expand during periods of organizational turmoil, making prioritization critical.
Operationalizing ERM
- Templates are used for tracking and updating risks across divisions, with approximately 50 templates distributed quarterly.
- Risks are streamlined to focus on the top 15–20 annually, but this number can fluctuate based on organizational circumstances (e.g., restructuring, bankruptcy).
Outcomes
The structured ERM process ensures proactive management of risks and ties risk mitigation strategies directly to performance indicators and strategic goals. Xerium’s approach emphasizes practical integration into business processes and scaling the framework based on organizational needs.
Resources
Fred Caloggero highlights the importance of leveraging tools and guidance from NC State’s ERM Initiative website for organizations looking to adopt or refine their ERM frameworks.
Original Article Source: “Transcript of Interview with Fred Caloggero on the ERM Process at Xerium Technologies Part 1-2“, Fred Caloggero and Bonnie Hancock, November 2011
