January 22, 2019
Two statements that are equally true:
Enterprise Risk Management (ERM) is a discipline that addresses an organization’s full spectrum of risks and seeks to manage those risks as an interrelated portfolio – all in support of achieving the organization’s goals and objectives. To use an analogy, it turns the tangled plate of risk spaghetti into a risk waffle. Once you have a risk waffle you can prioritize which square you want to eat; which square to set aside for later; or which square to toss in the trash.
Business owners and organizational leaders who are engaged in an ERM process in their organization have a less contentious relationship with their insurance premiums because they are more knowledgeable, more invested and more progressive than those that aren’t. In addition, organizations that implement ERM are safer, more accountable, higher performing and more profitable than organizations that don’t.
Setting up an ERM process and program can be super-complicated and time-consuming. An organization could spend thousands of dollars hiring an outside consultant to facilitate the process. That is appropriate in some cases, but there are some very simple and practical ways an organization can start implementing ERM without a major commitment of resources.
Basic steps for implementing an ERM program:
Effective ERM programs identify the top risks of all areas of an organization. These risks may be insurable via traditional insurance (i.e. buildings or equipment), or perhaps, the only response strategy may be to mitigate and control the risk (i.e. employee retirements or technology costs).
At Thomas McGee Group, we view risk as a strategic opportunity that we can leverage to make our clients stronger, safer and more profitable. Helping our clients develop and maintain ERM programs is one of many ways we help our clients build a foundation for sustained growth.
Author: Adam Balentine, Associate Partner/Director of Insurance Operations