I was reading this article from Gary W Patterson called, “Enterprise Risk Management (ERM) Applied to Benefit Operations and Strategic Planning”. In it, Gary, a.k.a the FiscalDoctor™, addresses these five questions about ERM:
1. Does ERM focus only on money?
2. What activities does ERM involve?
3. What are ERM deliverables?
4. How do I know whether our ERM program is a success?
5. How does ERM fit into the goals and structure of the organization?

To see the entire article, click here. For this post, I only want to focus on the response to #4. How do I know whether our ERM program is a success?

Gary answers: “Determining whether an organization’s ERM program is a success is a judgment call. The judgment is based on the effectiveness of the eight ERM activities. Are the program deliverables and risk responses effective?”

While I agree there is some element of “judgment call”, we should be moving away from qualitative measures of success. With my ERM hat firmly on my head at all times, I am also able to squeeze my Six Sigma hat on my noggin. (Six Sigma is a methodology for process improvement with a focus on variability and measurement of defects.)  At the heart of every Six Sigma engagement, one measures the current state of a process or output, then makes the improvement, then measures the future state and the difference. Thus, no judgment call but quantified proof.

I submit for an ERM project, one merely has to define some current and future state measures, as this is the sort of thing that Board members or leaders will want to see to compliment the only measure they are likely to focus on: the tens of thousands of dollars spent on consultants with little to show for it in the short-term.

Some examples of measures include: the number of risks identified, key risk indicators defined, action plans outstanding and completed, people trained on ERM, articles published on the Intranet, etc. If you have any more ideas, please leave your comments below.

Perhaps as a profession, risk practitioners need to move more in this direction so our performance can be measured against something tangible, because as discussed in earlier posts, it is difficult to measure success as “nothing bad has happened”.

I have three expectations when I read business books: they should be fun to read, void of any Greek letters and equations, and when I am done, I have taken away a few golden nuggets of information.

Stick Out Your Balance Sheet and Cough was both fun to read and I took away way more than the usual few nuggets; there are dozens of nuggets in there. (Needless to say, there were no quadratic equations either.)

It becomes very clear early on that you are not reading boring accounting theory or MBA jargon, but the cumulative experience of a very bright guy. I am the sort of person who enjoys case studies and real life examples and Gary Patterson (ak.a The FiscalDoctor) brings that style to his book. (I was hooked by page three of the introduction when he tells a tale of the crazy events that took place at a luggage company.)

When I read business books, I do so with a stack of those really small Post It Notes and stick them to great paragraphs so I can refer to them later. By the end of Stick Out Your Balance Sheet and Cough, I had dozens of little yellow tabs sticking out in every direction of the closed book.

Let’s face it, from owner or controller of a small- or medium-sized company to the CFO of a billion dollar company, everyone is busy. But this is an easy read with lots of great cases, lists and best practices which you will likely want to implement before you even finish each chapter. It’s just the sort of book which you can read on your commute in 2-3 days and worth re-reading once a year.

Riskczar likes it.