I received a nice email from John Fraser the other day, thanking me spreading the good word about ERM through this website. For those of you who are unfamiliar with Mr. Fraser, he co-wrote what I consider to be the best 14 pages ever written about ERM: The Rise and Evolution of the Chief Risk Officer: Enterprise Risk Management at Hydro One. (And there are diagrams and big fonts so it’s actually less than 14 pages.)

Mr. Fraser also recently wrote a book with Betty Simkins, Enterprise Risk Management: Today’s Leading Research and Best Practices for Tomorrow’s Executives. I have not read it yet, but hope to read it as soon as I find out what happens to Lisbeth Salander.

It’s also worth pointing out that when one brings up the Fraser/Simkins book on Amazon.ca, it notes that Customers who Bought this Book Also Bought The Black Swan by Taleb. Please don’t read that one. One Amazon reviewer crystallized my thoughts on the Black Swan as follows: “This book is about 300 pages too long. Read the first 5 pages, and skip the rest. (Taleb) has a very high opinion of himself.”

So in conclusion: Fraser: Yes. Taleb. No.

In a survey conducted during the Fall of 2007 by The Conference Board of Canada titled, “Who Reads What Most Often? A Survey of Enterprise Risk Management Literature Read by Risk Executives”, authors listed the top ten articles used by leading ERM practitioners (in order of year published). I’ve reprinted the list here with links to the respective documents or abstracts.

It’s no surprise that Mr. Kloman is on this list. For those of you new to the study of risk management, I recommend getting your hands on everything he has written. I’ve re-posted some of his work at riskczar.com site but I recommend you go buy his books.

H. Felix Kloman’s Risk Management Reports and Mumpsimus Revisited: Essays on Risk Management

Enterprise Risk Management at Hydro One Inc.

The CRO is Here to Stay by James Lam

Enterprise Risk Management: The Case of United Grain Growers by Harrington, Niehaus, and Risko

The Effect of Corporate Governance on the Use of Enterprise Risk Management: Evidence from Canada by Kleffner, Lee, and McGannon

The Rise and Evolution of the Chief Risk Officer: Enterprise Risk Management at Hydro One by Aabo, Fraser and Simkins

Enterprise Risk Management: An Empirical Analysis of Factors Associated with the Extent of Implementation by Beasley, Cluen, Hermanson

Mastering Uncertainty by FT and Ernst & Young

Emerging Best Practices in Developing Key Risk Indicators and ERM Reporting by James Lam

Incorporating Strategic Risk into Enterprise Risk Management: A Survey of Current Corporate Practice by Gates

Yesterday I wrote about a Hydro One case study and today I found (completely by accident) an entire chapter dedicated to Hydro One and their ERM effort in Chapter 11 of the book Enterprise Risk Management By David L. Olson, Desheng Dash Wu.

You can access a limited preview of this book if you paste this text <<  ERM Outcomes and Benefits at Hydro One  >> to http://books.google.com/ or buy it from your favourite book store.

 

If I got together with all the other enterprise risk management practitioners and thought leaders, and spend a day filling in an Ishikawa diagram looking for root causes for why ERM has not achieved rock star status (or at the very least SOX status), we would be remiss if we did not identify: “There just are not enough case studies or success stories about ERM implementations.”

I know of only one such case study and have been peddling it for the last few years. When clients asked for something more real than consultant speak or COSO ERM gibberish, I shared this 2005 case study about the ERM implementation at Hydro One, a Canadian electric utility company.

It’s a really good read (less than 14 pages with lots of charts and diagrams) and because it is written in case form, it makes it easy to understand.

http://www.fma.org/FMAOnline/Archive/HydroOne%20posted%20to%20SSRN%2012-10-2004.pdf

Finally, while Googling Hydro One, I came across a link to a Harvard Business School case, dated July 2008, about ERM at Hydro One which you may want to take a look at for $7.

Amended 9/10/2009: See a bit more on Hydro One here http://riskczar.com/2009/09/10/a-bit-more-on-hydro-one/

PwC re-iterates that ERM has become a priority at the board and senior management levels but more work must be done in order to embed ERM into strategic decisions and day to day risk taking. Additionally, risk appetite must be aligned with the business planning process and ERM is not being used to manage emerging risks.

Finally, they suggest that the pressure by ratings agencies in the US will drive ERM over the next few years, as will leveraging the efforts of IFRS or Solvency II. This is great news for risk practitioners like the Riskczar who are waiting for the tipping point.

Typical of all PwC publications, the documents are loaded with graphs and diagrams, and of course pretty colours.

A PowerPoint deck is found here: http://www.pwc.com/en_GX/gx/insurance/pdf/erm_highlights.pdf

The executive summary and complete report can be downloaded from here: http://www.pwc.com/gx/en/insurance/erm/index.jhtml

Amended 9/10/2009: There is a link to an additional PwC document called “Seizing Opportunity” at this link http://riskczar.com/2009/09/10/a-bit-more-on-hydro-one/ which described ERM at Hydro One.