Risk Insider: Grace Crickette

ERM and the Art of War — Energy

By: | October 10, 2016 • 3 min read

Grace Crickette, a leader in enterprise risk management, is special administrator, Finance and Administration for San Francisco State University. She can be reached at [email protected]

Topics: ERM | Risk Insider

This is the tenth post in a series from Risk Insider Grace Crickette on how to gracefully bring together traditional risk management, change management techniques and enterprise risk management concepts. The series is inspired by strategies devised by Sun Tzu, a Chinese military general and philosopher.

Make ERM, Not War

rainbow peace sign copy

Art of War Key Principal: Opportunistic Flexibility In Adapting Strategies And Tactics To Situation

The way to capitalize on the endless opportunities created by ever-changing conditions, is to become engaged as a part of a well thought out plan and be flexible in adapting tactics to those ever-changing conditions within the context of each pre-determined strategy.

Chapter V, focuses us in on moving to the Creative or Energy mode, wherein the greatest amount of preparation and on-going effort takes place in implementing Enterprise Risk Management. From our menu of common elements of an ERM Program, let’s move on to the fourth element: Form multidisciplinary groups focused on ERM and specific initiatives

In my last post, we looked at the importance of forming groups to support the ERM initiatives – getting the band together. Once you have the band together, then what?

Provide a Clear Vision and Specific Tactics and Outcomes

Here are some ideas and examples on how to think about, create and execute your vision.

• Establish a sense of Urgency

• Examine the market and competitive realities

• Identify and discuss crisis, potential crisis or major opportunities

From “Leading Change” by John P. Kotter

• Develop estimates – outcomes/targets

• What is our value message?

• Manage the barriers!

From “The Art of War”

Vision Statement and Strategy (Tactics):

Our mission is to enable all members of our organization to identify and manage risks associated with their activities, consistent with the strategy and objectives set by our leadership.  By strategically managing risk we can reduce the chances of loss, create greater financial stability, and protect our resources

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Strategy: Enterprise Risk Management. We will move towards an enterprise approach to identifying risks and managing risks including financial, business, operational and governance risks

Strategy: Identifying and Reducing the Cost of Risk. By identifying and analyzing the full cost of risk we will develop strategic plans to reduce the cost and free up resources to be used for meeting the University’s mission

Create a Sense of Urgency With Specific Targets

Here’s an example of a call to action with a specific measurable outcome within a specific time.

Mission: Reduce the Cost of Risk
by 15 Percent in 24 Months

What was the outcome?

Reduced Cost of Risk
by 16 Percent in 18 Months

The organization exceeded the call to action and delivered at a higher percentage and in a shorter amount of time. How was this possible?

Leverage the power of the actuary! Analyzing data beyond frequency and severity married with deep inquiry into a specific area of operation enables the ERM practitioner to be capable of determining the changes that can be made to obtain very specific results.  This allows you to be almost certain of the outcome. Measure twice and cut once!

Focus. Instead of trying to make many changes at once, make very specific and incremental changes.

Have your actuary present alongside you to support the needed change and educate your organization, and through that process identify your Champions and Supporters.

Bring your Champions and Supporters together and share the vision, the target outcomes, and train them in the tactics to make the change.  If possible make this an exciting event rather than a meeting.

Bring your Champions and Supporters together to launch your change. Make it an exciting event rather than a meeting.

Bring your Champions and Supporters together to launch your change. Make it an exciting event rather than a meeting.

Move rapidly. Stay focused; deploy as many resources as possible to your target.

In addition to your Champions and Supporters, there are at least three types of people that you have to manage when implementing change:

• Group 1: People who want the change but have been disappointed in the past because change has not happened.

• Group 2: People who don’t want any change.

• Group 3: People who don’t notice change until after it has happened.

If you feel the need for speed … the results will be:

• Group 1 will be excited because they see the change actually happen.

• By moving rapidly you will have good results before Group 2 can derail you.

• The first that Group 3 will hear about the change will be the results!

I suggest that you brainstorm with your team regarding why some may be against the change and prepare FAQ sheets with the answers already completed.  This way you are prepared for battle.

The result of being prepared, rallying the troops, and moving quickly is that you have a quick win that gives you, your team and your ERM program credibility.

Now repeat!

A Strategic View of Risk – Examples of Outcomes

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Communicate your good results and then identify other opportunities. In this example there are four key opportunities identified that will add value and that are measurable.

• Efficiency = reducing the number of days to execute a process.

• Cost of Risk = reduce the cost of claims.

• Cost of Borrowing = improved credit rating because of ERM capabilities.

• Redundancy = developing an ERM IT platform can reduce the number of IT systems needed.

The opportunities will differ by organization, but I’m certain, ERM Warrior, that you will seize them!

Key Takeaway: Implementing ERM takes vision, urgency and the capability to focus and execute rapidly. Leverage the power of the actuary and do deep inquiry before you set your targets. By messaging your vision with specific outcomes you increase your chance of success because people know where you are going and they will follow!

Remember — It’s not Risk Management, its Change Management!

Risk Matrix: Presented by Liberty Mutual Insurance

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The R&I Editorial Team can be reached at [email protected]