Service Is Value
Those who know me in the risk management industry know that I am a real stickler when it comes to using vague words or terminology. Ironically, my word obsession first started when I explored the true meaning of the word risk.
We use this word everywhere in our industry but do we really understand what it truly means? Moreover, do we in the industry all use the word consistently and with the same intention?
How is value derived from your risk management programs? I recall an expression that resonated with me: “Value is created by being of service.”
Another choice nebulous word that often makes me crazy is the word, safe. Honestly, what does that mean? To add to continued aggravation, a new word recently made me pause — the word is value. My word definition quest started when someone asked me: What value was my risk management program providing? It is a fair question, but if only I truly knew what it meant.
An accountant sees value as the monetary worth of something. Economists view value as the utility of something and its power of trade. Marketers understand value through the eyes of the consumer and their perception of the worth of something.
So, how do risk managers recognize value? How is value derived from your risk management programs? I recall an expression that resonated with me: “Value is created by being of service.”
Think about an item or service that you own that you simply couldn’t live without. I think of my smartphone. It is my portable email, calendar, music system, calculator, flashlight, etc. — and let’s not forget, my mobile phone too. This gadget truly serves me and without question, I truly value it. Value in this case is a measure of the sheer size of the hole it would leave if I lost it.
In much the same way, risk management must serve an organization in an essential way for it to truly be of value.
Imagine having a program that forces the clear articulation of an organization’s strategy and goals. Which brings forward intelligence that enables more sophisticated operational and strategic decisions that can drive optimized and sustained performance.
Information that was derived from the program allows an organization to become more agile and respond more quickly. This allows an organization to avoid unwanted situations or seize opportunities before its competition does. What a program. What a service. What value.
This is the value of a solid enterprise risk management program.
An enterprise risk management (ERM) program creates a neutral centralized line-of-sight to risks and issues. This consistent rendition and single source of truth around sensitive risk issues allows the organization to avoid confusion or misinterpretation of risk events with stakeholders.
The risk intelligence created by an ERM program helps to defend the allocation of scarce resources on risk management activities.
By having a logical and consistent means of understanding risks, the organization can more easily defend its decisions around investments in risk response activities and its allocation of scarce resources.
Also, by centralizing decisions around risk management activities, the ERM program forces governing entities to truly recognize their organization’s risk position.
By making centralized decisions around which risk controls to institutionalize, leaders can examine and follow a collective, not individual, risk appetite or tolerance for risk and protect their shareholders.
That is what I call valuable service. But I guess the best way to measure if your ERM program is truly valuable, is by seeing how many people would miss it if it was gone.