Enterprise Risk Management
21
1 AH&T Nonprofit’s 13 th Annual Risk Management Seminar Leslie T. White CPCU, CIC, ARM, CRM Croydon Consulting, LLC November 10, 2005 Enterprise Risk Management
-
Upload
croydon-consulting-llc -
Category
Economy & Finance
-
view
7 -
download
1
description
Overview of enterprise risk management and process for setting up a program
Transcript of Enterprise Risk Management
1
AH&T Nonprofit’s 13th Annual Risk Management
Seminar
Leslie T. WhiteCPCU, CIC, ARM, CRM
Croydon Consulting, LLC
November 10, 2005
Enterprise Risk
Management
2
Risk Management
A discipline for dealing with the possibility that some future event may cause unexpected results
Dealing with Dealing with uncertainty . . .uncertainty . . .
3
Principles of Enterprise Risk Management
Every entity exists to provide value to stakeholders
All entities face uncertainty which presents both risk & opportunity with potential to erode, preserve or enhance value
ERM enables management to deal with uncertainty, associated risk & opportunity, enhancing its capacity to build value
4
Purpose of Enterprise Risk Management
To provide value to stakeholders
To help nonprofits get to where they want to go
To avoid pitfalls & surprises
To enhance value, achieve the mission
5
Dealing with uncertainty . . .
Pre-loss exercise that reflects organization’s post-loss goals and reflective of the organization’s culture
To identify potential events that if they occur would affect the organization
Events can have negative, positive or both impact
To manage risks within your risk appetite
6
Dealing with uncertainty . . .
Determine how much uncertainty (risk and opportunity) you are prepared to accept as strive to grow value, achieve mission
Risk management enable management to effectively deal with uncertainty and associated risk and opportunity
Helps management achieve performance targets and prevent loss of resources
7
Innovation requires risk taking. Taking risks requires informed, fact-based decision making.
Why Risk Management?
8
Risk Management Roles
Board • Define expectations• Set strategy & high level
objectives• Resource allocation • Adopt risk management policy
Senior Management• Responsible for all activities• Sets the tone & influences of
the internal environment (principles, values)
• Develop risk management philosophy, appetite & culture
9
Risk Management Roles
Risk Management Committee • Propose risk management
policy & philosophy• Establish risk management
goals • Develop & implement a risk
management program• Help managers incorporate risk
management into operations• Convert risk management
strategies into operations• Present annual report to Board
10
Risk Management Program Development
Plan
Establish risk management committee Create action plan Establish risk management goals Adopt risk management policy Evaluate risk attitudes (tolerance &
appetite) for areas of risk
11
Risk Management Program Development
Plan
Follow steps of risk management process• Identify & analyze risks (risk assessment)• Evaluate & prioritize• Select & implement strategies and
techniques• Monitor & revise
Annual report to board
12
Risk Management Attitudes
Level of risk tolerance & risk appetite
Level of commitment to risk management
Risk management strengths & weaknesses
Available resources – people, time & money
13
Risk Management Basics
A state of mind Involve people at all
levels Provide instruction,
training and equipment Develop and follow
procedures Encourage input
14
The first standard that should be in effect for any organization is the safety
of its constituents.
Goal of Risk Management
15
Risk Management Cycle
Identify risks
Evaluate & prioritize risks
Select risk management techniques
Implement techniques
Monitor & improve the program
16
Risk Management Process
1. Acknowledge and identify risks
“What could go wrong?”
•People•Property•Income•Goodwill
Nonprofit Assets Dimensions of Risk•Operational•Legal•Political•Financial & market
17
Risk Management Process
2. Evaluate and prioritize risks
Frequency Severity
Risk Analysis
18
Risk Management Process
3. Select and implement risk management techniques
AvoidanceModificationRetentionTransfer
“What will we do?”
19
Risk Management Process
4. Monitor and update the program
•Compare actual to expected results
•Any new programs, activities or risks?
•Changes in mission or strategy?
20
Cost of Risk
Retained losses Insurance premiums or payments
to outside sources for funds Costs of measures to prevent or
reduce losses Administrative costs for risk
management
21
Croydon Consulting, Croydon Consulting, LLCLLC
Leslie T. White, CPCU, CIC, ARM, CRM
P. O. Box 1414
Severna Park, MD 21146-8414
410-544-0913 Fax 410-544-9913
Email: [email protected]
www.croydonconsult.com
