Riskczar's Blog

Courtesy: Trevor Levine

Evidence of Value#1: Standard & Poor’s

There is definitely implied values to knowing where your organization’s known unknowns are lurking. But how can you monetize ERM?

Pretty soon, Standard & Poor’s will begin to incorporate their assessment of your management and ERM capabilities as part of its overall rating of your credit which clearly has financial implications. What if having robust ERM processes improves your S&P credit rating and borrowing costs by 100 basis points? (Or what if not having ERM has negative implications on your credit rating and borrowing costs?) If you have $10 million of debt, that 100 bps is equal to $100,000 savings per year in perpetuity. Even after paying a consultant, your return on that investment would start paying you back in Year 2.

Evidence of Value#2: Hydro One Credit Rating Upgrade

“Canadian utility Hydro One, which—after a five-year implementation of rigorous, holistic risk management practices—received a favorable credit rating by both Moody’s and Standard & Poor’s, resulting in a lower cost of capital.” (“Seizing Opportunity: Linking Risk and Performance”, PricewaterhouseCoopers) pwc-risk-performance-2009 (riskczar).pdf

Evidence of Value#3: Equity Analyst Upgrades

According to a study by UK investment analysts and managers, three-quarters of those surveyed would upgrade their rating of a company if they demonstrated strong risk management practices while downgrading those with weak or no risk management capabilities.

Having robust risk management capabilities is no longer a nice to have, it is the cost of entry.

Evidence of Value#4: Big ISO Certification Banner on your Building

Ever drive through an industrial neighbourhood and see one of those ISO 9000 banners on a company’s headquarters? Well, with an ISO 33000 standard, you can impress your customers with a big ISO banner to show off your risk management capabilities. Although not intended for certification purposes, banners are very impressive!

Evidence of Value#5: Three Dimensions of Happenings

Enterprise risk management doesn’t just help you identify what can happen; ERM also helps you determine how it can happen and why it could happen.

Evidence of Value#6: Adds Rigor to Business Planning

You are already performing business planning and thinking about managing your weaknesses and the threats to achieving your business objectives; ERM just adds some additional rigor to what you already doing.

Evidence of Value#7: ERM Gets Everyone in a Room

Regardless if your organization has 20 or 20000 people, how often do you get your top managers in a room talking about something? Enterprise risk programs is often a catalyst for getting the heads of the silos to listen and share on a very regular basis

Evidence of Value#8: ERM builds trust

Detecting and deterring risks and transparency between directors, management and shareholders protects your reputation and the one thing no organization can afford to lose: trust.

Evidence of Value#9: ERM helps you leverage your regulatory processes

Grant Thornton: “When properly implemented, (ERM) not only provides improved risk information for better decision-making, but also overlaps with many measures already undertaken by organizations to comply with regulations.”

Evidence of Value#10: Resilience (new)

“While ERM is not a panacea for all the turmoil experienced in the markets in recent years, robust engagement by the board in enterprise risk oversight strengthens an organization’s resilience to significant risk exposures.” – COSO

Keywords: “ERM benefits”