Fluent Essays

Please review Chapter 5: ERM in Practice at the University of California Health System Case and provide response for following questions.1. Your medical group wants to expand by starting a new venture, owning and operating a pharmacy. In order to increase the chances for success, you have been asked to perform an enterprise risk assessment that includes reputational risk. Give three examples of how starting a new venture might have risk events that could lead to repercussions that would negatively impact the organization’s reputation and three examples where it might be enhanced, creating opportunity.2. Explain how improvement is measured with KPIs and give one example related to Human Capital and how this KPI might help you improve your organization.3. What do you think is the difference between traditional risk management and enterprise risk management?You are required to respond to the questions thoroughly, in 250 -to-300 words for each question. Be sure to include at least three reference sources. APA rules for formatting, quoting, paraphrasing, citing, and listing of sources are to be followed. implementing_enterprise_risk_management__2_.pdf Unformatted Attachment Preview www.it-ebooks.info www.it-ebooks.info Additional Praise for Implementing Enterprise Risk Management “Educators the world over seeking to make the management of risk an integral part of management degrees have had great difficulties in providing their students with a definitive ERM text for their course. The Standards and associated Handbooks helped, but until the arrival of Implementing Enterprise Risk Management: Case Studies and Best Practices, there has been no text to enlighten students on the application of an effective program to manage risk across an enterprise so that objectives are maximized and threats minimized. Fraser, Simkins, and Narvaez have combined with a group of contributors that represent the cream of risk practitioners, to provide the reader with a clear and concise journey through the management of risk within a wide range of organizations and industries. The knowledge, skills, and experience in the management of risk contained within the covers of this book are second to none. It will provide a much needed resource to students and practitioners for many years to come and should become a well-used reference on the desk of every manager of risk.” —Kevin W. Knight AM, chairman, ISO/TC 262—Risk Management “The authors—Fraser, Simkins, and Narvaez—have done an invaluable service to advance the science of enterprise risk management by collecting an extensive number of wonderful case studies that describe innovative risk management practices in a diverse set of companies around the world. This book should be an extremely valuable source of knowledge for anyone interested in the emerging and evolving field of risk management.” —Robert S. Kaplan, senior fellow, Marvin Bower Professor of Leadership Development, emeritus, Harvard University “Lessons learned from case studies and best practices represent an efficient way to gain practical insights on the implementation of ERM. Implementing Enterprise Risk Management provides such insights from a robust collection of ERM programs across public companies and private organizations. I commend the editors and contributors for making a significant contribution to ERM by sharing their experiences.” —James Lam, president, James Lam & Associates; director and Risk Oversight Committee chairman, E∗ TRADE Financial Corporation; author, Enterprise Risk Management—From Incentives to Controls “For those who still think that enterprise risk management is just a fad, the varied examples of practical value-generating uses contained in this book should dispel any doubt that the discipline is here to stay! The broad collection of practices is insightful for students, academics, and executives, as well as seasoned risk management professionals.” —Carol Fox, ARM, director of Strategic and Enterprise Risk Practice, RIMS “Managing risk across the enterprise is the new frontier of business management. Doing so effectively, in my view, will be the single most important differentiating factor for many enterprises in the twenty-first century. Implementing Enterprise Risk Management: Case Studies and Best Practices is an innovative and important addition to the literature and contains a wealth of insight in this critical area. This book’s integration of theory with hands-on, real-world lessons in managing enterprise risk provides an opportunity for its readers to gain insight and understanding that could otherwise be acquired only through many years of hard-earned experience. www.it-ebooks.info I highly recommend this book for use by executives, line managers, risk managers, and business students alike.” —Douglas F. Prawitt, professor of Accounting at Brigham Young University, and Committee of Sponsoring Organizations (COSO) Executive Board member “The real beauty of and value in this book is its case study focus and the wide variety of firms profiled and writers’ perspectives shared. This will provide readers with a wealth of details and views that will help them chart an ERM journey of their own that is more likely to fit the specific and typically customized ERM needs of the firms for whom they toil.” —Chris Mandel, senior vice president, Strategic Solutions for Sedgwick; former president of the Risk Management Society and the 2004 Risk Manager of the Year “Implementing Enterprise Risk Management looks at many industries through excellent case studies, providing a real-world base for its recommendations and an important reminder that ERM is valuable in many industries. I highly recommend this text.” —Russell Walker, Clinical associate professor, Kellogg School of Management; author of Winning with Risk Management “The body of knowledge in Implementing Enterprise Risk Management continues to develop as business educators and leaders confront a complex and rapidly changing environment. This book provides a valuable resource for academics and practitioners in this dynamic area.” —Mark L. Frigo, director, Strategic Risk Management Lab, Kellstadt Graduate School of Business, DePaul University “The management of enterprise risk is one of the most vexatious problems confronting boards and executives worldwide. This is why this latest book by Fraser, Simkins, and Narvaez is a much needed and highly refreshing approach to the subject. The editors have managed to assemble an impressive list of contributors who, through a series of fascinating real-life case studies, adroitly help educate readers to better understand and deal with the myriad of risks that can assault, seriously maim, and/or kill an organization. This is a ‘how to’ book written with the ‘risk management problem solver’ in mind. It provides the link that has been missing for effectively teaching ERM at the university and executive education levels and it is an exceptional achievement by true risk management advocates.” —Dr. Chris Bart, FCPA, founder and lead faculty, The Directors College of Canada “The Institute of Risk Management welcomes the publication of this highly practical text which should be of great interest to our students and members around the world. Implementing Enterprise Risk Management brings together a fine collection of detailed case studies from organizations of varying sizes and working in different sectors, all seeking to enhance their business performance by managing their risks more effectively, from the boardroom to the shop floor. This book makes a valuable contribution to the body of knowledge of what works that will benefit the development of the risk profession.” —Carolyn Williams, technical director, Institute of Risk Management www.it-ebooks.info IMPLEMENTING ENTERPRISE RISK MANAGEMENT www.it-ebooks.info The Robert W. Kolb Series in Finance provides a comprehensive view of the field of finance in all of its variety and complexity. The series is projected to include approximately 65 volumes covering all major topics and specializations in finance, ranging from investments, to corporate finance, to financial institutions. Each volume in the Kolb Series in Finance consists of new articles especially written for the volume. Each volume is edited by a specialist in a particular area of finance, who develops the volume outline and commissions articles by the world’s experts in that particular field of finance. Each volume includes an editor’s introduction and approximately thirty articles to fully describe the current state of financial research and practice in a particular area of finance. The essays in each volume are intended for practicing finance professionals, graduate students, and advanced undergraduate students. The goal of each volume is to encapsulate the current state of knowledge in a particular area of finance so that the reader can quickly achieve a mastery of that special area of finance. www.it-ebooks.info IMPLEMENTING ENTERPRISE RISK MANAGEMENT Case Studies and Best Practices Editors John R.S. Fraser Betty J. Simkins Kristina Narvaez The Robert W. Kolb Series in Finance www.it-ebooks.info Cover Design: Wiley Cover Image: © iStock.com/clauiad Copyright © 2015 by John R.S. Fraser, Betty J. Simkins, Kristina Narvaev. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions. 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Library of Congress Cataloging-in-Publication Data: ISBN 978-1-118-69196-0 (Hardcover) ISBN 978-1-118-74576-2 (ePDF) ISBN 978-1-118-74618-9 (ePub) Printed in the United States of America. 10 9 8 7 6 5 4 3 2 1 www.it-ebooks.info To Wendy, my wonderful wife and my inspiration, and to my parents who instilled in me a lifelong thirst for learning. —John Fraser To my husband (Russell) and our family: sons and daughtersin-law (Luke & Stephanie and Walt & Lauren), daughter and son-in-law (Susan & Jason), and our youngest daughter (April). Thank you for your love, support, and encouragement! —Betty Simkins I would like to thank my husband and four children for supporting me on my journey of writing two chapters and co-editing this book. I would also like to thank the Risk and Insurance Management Society for supporting me during my educational years and providing great workshops and conferences on enterprise risk management. —Kristina Narvaez www.it-ebooks.info www.it-ebooks.info Contents Foreword 1 xiii Enterprise Risk Management Case Studies: An Introduction and Overview 1 John R.S. Fraser, Betty J. Simkins, and Kristina Narvaez PART I Overview and Insights for Teaching ERM 2 An Innovative Method to Teaching Enterprise Risk Management: A Learner-Centered Teaching Approach 17 19 David R. Lange and Betty J. Simkins PART II ERM Implementation at Leading Organizations 3 ERM at Mars, Incorporated: ERM for Strategy and Operations 37 39 Larry Warner 4 Value and Risk: Enterprise Risk Management at Statoil 59 Alf Alviniussen and Håkan Jankensgård 5 ERM in Practice at the University of California Health System 75 Grace Crickette 6 Strategic Risk Management at the LEGO Group: Integrating Strategy and Risk Management 93 Mark L. Frigo and Hans Læssøe 7 Turning the Organizational Pyramid Upside Down: Ten Years of Evolution in Enterprise Risk Management at United Grain Growers 107 John Bugalla ix www.it-ebooks.info x 8 Contents Housing Association Case Study of ERM in a Changing Marketplace 119 John Hargreaves 9 Lessons from the Academy: ERM Implementation in the University Setting 143 Anne E. Lundquist 10 Developing Accountability in Risk Management: The British Columbia Lottery Corporation Case Study 179 Jacquetta C. M. Goy 11 Starting from Scratch: The Evolution of ERM at the Workers’ Compensation Fund 207 Dan M. Hair 12 Measuring Performance at Intuit: A Value-Added Component in ERM Programs 227 Janet Nasburg 13 TD Bank’s Approach to an Enterprise Risk Management Program 241 Paul Cunha and Kristina Narvaez PART III Linking ERM to Strategy and Strategic Risk Management 14 A Strategic Approach to Enterprise Risk Management at Zurich Insurance Group 251 253 Linda Conrad and Kristina Narvaez 15 Embedding ERM into Strategic Planning at the City of Edmonton 281 Ken Baker 16 Leveraging ERM to Practice Strategic Risk Management 305 John Bugalla and James Kallman PART IV 17 Specialized Aspects of Risk Management Developing a Strategic Risk Plan for the Hope City Police Service 319 321 Andrew Graham 18 Blue Wood Chocolates Stephen McPhie and Rick Nason www.it-ebooks.info 335 CONTENTS 19 Kilgore Custom Milling xi 363 Rick Nason and Stephen McPhie 20 Implementing Risk Management within Middle Eastern Oil and Gas Companies 377 Alexander Larsen 21 The Role of Root Cause Analysis in Public Safety ERM Programs 397 Andrew Bent 22 JAA Inc.—A Case Study in Creating Value from Uncertainty: Best Practices in Managing Risk 427 Julian du Plessis, Arnold Schanfield, and Alpaslan Menevse 23 Control Complacency: Rogue Trading at Société Générale 461 Steve Lindo 24 The Role of VaR in Enterprise Risk Management: Calculating Value at Risk for Portfolios Held by the Vane Mallory Investment Bank 489 Allissa A. Lee and Betty J. Simkins 25 Uses of Efficient Frontier Analysis in Strategic Risk Management: A Technical Examination 501 Ward Ching and Loren Nickel PART V Mini-Cases on ERM and Risk 523 26 525 Bim Consultants Inc. John R.S. Fraser 27 Nerds Galore 529 Rob Quail 28 The Reluctant General Counsel 535 Norman D. Marks 29 Transforming Risk Management at Akawini Copper 539 Grant Purdy 30 Alleged Corruption at Chessfield: Corporate Governance and the Risk Oversight Role of the Board of Directors Richard Leblanc www.it-ebooks.info 547 xii 31 Contents Operational Risk Management Case Study: Bon Boulangerie 555 Diana Del Bel Belluz PART VI 32 Other Case Studies Constructive Dialogue and ERM: Lessons from the Financial Crisis 559 561 Thomas H. Stanton 33 Challenges and Obstacles of ERM Implementation in Poland 577 Zbigniew Krysiak and Slawomir Pijanowski ¯ 34 Turning Crisis into Opportunity: Building an ERM Program at General Motors 607 Marc S. Robinson, Lisa M. Smith, and Brian D. Thelen 35 ERM at Malaysia’s Media Company Astro: Quickly Implementing ERM and Using It to Assess the Risk-Adjusted Performance of a Portfolio of Acquired Foreign Companies 623 Patrick Adam K. Abdullah and Ghislain Giroux Dufort About the Editors 649 Index 651 www.it-ebooks.info Foreword E nterprise Risk Management is an evolving discipline focused on a complex and still imperfectly-understood subject. In such a situation, science is advanced best by collecting data from multiple, independent sites. A rich set of observations educates the field’s scholars and practitioners and provides the foundation for them to develop descriptive and normative theories as well as codified best practices about the subject. The authors—Fraser, Simkins, and Narvaez—have done an invaluable service to advance the science of enterprise risk management by collecting an extensive number of wonderful case studies that describe innovative risk management practices in a diverse set of companies around the world. This book should be an extremely valuable source of knowledge for anyone interested in the emerging and evolving field of risk management. We should be grateful to the editors and to each chapter author for expanding the body of knowledge for risk management professionals and academics. Robert S. Kaplan Senior Fellow, Marvin Bower Professor of Leadership Development, Emeritus Harvard University xiii www.it-ebooks.info www.it-ebooks.info CHAPTER 1 Enterprise Risk Management Case Studies An Introduction and Overview JOHN R.S. FRASER Senior Vice President, Internal Audit, and former Chief Risk Officer, Hydro One Networks Inc. BETTY J. SIMKINS Williams Companies Chair of Business and Professor of Finance, Oklahoma State University KRISTINA NARVAEZ President and Owner of ERM Strategies, LLC Businesses, business schools, regulators, and the public are now scrambling to catch up with the emerging field of enterprise risk management. —Robert Kaplan (quote from Foreword in Fraser and Simkins, 2010) Most executives with MBA degrees were not taught ERM. In fact, there are only a few universities that teach ERM. So some business school graduates are strong in finance, marketing, and management theory, but they are limited in terms of critical thinking, business acumen, and risk analysis skills. —Paul Walker1 THE EVOLUTION OF ENTERPRISE RISK MANAGEMENT Over the past two decades enterprise risk management (ERM) has evolved from concepts and visions of how risks should be addressed to a methodology that is becoming entrenched in modern management and is now increasingly expected by those in oversight roles (e.g., governing bodies and regulators). As Felix Kloman describes in his chapter “A Brief History of Risk Management,” published in Fraser and Simkins (2010), many of the concepts go back a very long time and many of the so-called newly discovered techniques can be 1 www.it-ebooks.info 2 Implementing Enterprise Risk Management referenced to the earlier writings and practices described by Kloman. However, it is only from around the mid-1990s that the concept of giving a name to managing risks in a holistic way across the many operating silos of an enterprise started to take hold. In the 1990s, terms such as integrated risk management and enterprisewide risk management were also used. Many thought leaders, for example, those who created ISO 31000,2 believe that the term risk management is all that is needed to describe good risk management; however, many others believe that the latter term is often used to describe risk management at the lower levels of the organization and does not necessarily capture the concepts of enterprise-level approaches to risk. As a result, the term ERM is used throughout this book. As ERM continues to evolve there is still much discussion and confusion over exactly what it is and how it should be achieved. It is important to realize that it is still evolving and may take many more years before it is fully codified and practiced in a consistent way. In fact, there is a grave danger now of believing that there is only one way of doing ERM. This is probably a mistake by regulators who have too eagerly seized some of these concepts and are trying to impose them when the methods are not fully understood, and in some cases the requirements are unlikely to produce the desired results. As Fraser and Simkins (2010) noted in their first book on ERM: “While regulatory interest can force ERM into companies, if not d ... Purchase answer to see full attachment