The Importance of Board Support for Enterprise Risk Management: Part 1

A critical element for the success of any ERM effort is the involvement and “buy-in” of the board of directors. Michael Somich, Executive Director of Internal Audit at Duke University, discusses the involvement of the board at Duke and how they have bought into the ERM process and how they see the value it brings to the table when discussing risks on a macro-level.

Overview:

The conversation focuses on the engagement of Duke University’s Board of Directors in Enterprise Risk Management (ERM) and the evolution of their involvement in strategic risk oversight.

Key Points:

1. Board’s Role in Risk Oversight:

   • Duke’s Audit Committee meets annually with senior leadership, including the president, chancellor, provost, and executive vice president, to review and discuss the university’s top ten strategic risks.
   • These sessions involve updates on mitigation strategies and changes in risk profiles year over year.

2. Catalyst for Enhanced Engagement:

   • A retired PepsiCo executive on the Audit Committee suggested presenting a heat map of risks, ownership, and mitigation strategies. This feedback became a guiding framework for future presentations and discussions.

3. Audit Committee vs. Full Board:

   • The Audit Committee manages the risk oversight process but reports key findings to the full board.
   • In 2009, a retreat involved the entire board in strategic risk assessment, leading to periodic discussions at board meetings.

4. Frequency of Risk Discussions:

   • Strategic risks are addressed at each board meeting, often integrated into presentations by specific university sectors, such as athletics.

5. Evolution of Discussions:

   • The board’s focus on risks has deepened, with more proactive inquiries into strategic risks related to decisions, reflecting a shift in the board’s engagement level.

6. Changes in Board Materials:

   • While the total volume of board materials hasn’t increased, the content has been tailored to facilitate more effective risk discussions, leveraging board members’ expertise.

Conclusion:

Duke University’s integration of ERM into board discussions has evolved significantly, driven by feedback, strategic presentations, and continuous engagement. This approach enhances the board’s ability to oversee and contribute to risk management strategies effectively.

Original Article Source:  “Transcript of Video Interview with Mike Somich on the Importance of Board Support for Enterprise Risk Management Parts 1-3“, Michael Somich and Mark Beasley, 2012