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Ahead of RIMS ERM Conference, Keynote Speaker Gretchen Anderson Talks Culture Change

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At next month’s RIMS ERM Conference 2019, the opening keynote speaker will be Gretchen Anderson, director of the Katzenbach Center at PwC and co-author of The Critical Few: Energize Your Company’s Culture by Choosing What Really Matters. Her address will aim to provide risk professionals with a playbook for successful enterprise-wide culture change. She recently sat down with Risk Management Monitor for a preview, discussing the relationship between culture and productivity and the role of risk management in helping drive change.

Many companies have hired you to help them institute culture changes. What are some unrealistic goals you encounter?

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Gretchen Anderson: The unrealistic goals that we hear about when we’re talking about culture change often have to do with speed and type. Regarding speed, the mistake I often hear leaders make is when they say something like: ‘I need my company’s whole culture to change by a deadline.’ That could be in time for them to roll out a new operating model or in time for a new CEO who’s about to take charge. And I tell them it takes much longer than they think it will take. Nevertheless, there are ways you can think about speeding that up as long as you accept that you’re working on a timeframe of years, and not months.
The other unrealistic goal is thinking you can implant another organization’s culture into yours. You can’t just copy another culture and expect that to spark innovation. Think of an enterprise as an organism that has to adapt or reject new tissue; an idea will be rejected if it doesn’t line up with the ways that people already like to work.

Is culture change easier for smaller or larger enterprises?

GA: A small company has the ability to test and learn really quickly, especially if they need to shift the culture into one where its people can work more virtually or even where they hold meetings more effectively. Small organizations have the advantage of moving quickly but they don’t have as much evidence and data points later, and so they don’t always see the cumulative effects over time simply because they have comparatively fewer employees than larger enterprises.

What are the top factors/traits you have noticed that companies possessed when implementing a successful culture change?

GA: Everything about a cultural evolution involves taking it out of the realm of faith and bringing it into the realm of proof. It can’t just be about people liking their work better, organizations [need to get] people to really understand how their behaviors, habits, norms and way of working are going to help their business be successful.

As a consultant, what has your experience with risk professionals been like?

GA: The people in risk management are such careful observers of the way that we work, the way that work gets done and what people can bring to a solution. I think their voice needs to be really strong to facilitate a discussion about how culture supports the business.

One of the key takeaways from the 2018 ERM Conference was that risk managers need to earn their seat at the table, but they can also be the drivers of culture change. Which do you think should come first?

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GA: I would absolutely say a seat at the table has to come first. Once risk managers earn that seat, they can track how effective the change is and then that becomes the case for further change. I think it’s really authentic to act your way into a new way of thinking because it acknowledges there’s always a level of experimentation and proof in trying to evolve your behavior.

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For Anderson’s full interview and a deeper dive into culture change, click here to check out her episode of RIMScast.

New AMRAE Survey Explores RMIS’ Global Market Trends

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Recently, the Association for the Management of Risk And Insurance of Enterprise (AMRAE) and EY jointly released the 11th edition of the RMIS Panorama, offering an in-depth look at the organizations and professionals who are using risk management information systems (RMIS), how well they have adapted, and guidance for those seeking their first or newest framework.

After surveying 570 risk managers and 36 vendors from more than 30 countries, Panorama’s authors note the top reported benefits from RMIS were the ability to spend more time analyzing (and not collecting) data, harmonizing practices and reducing silos. Of those who have adopted these systems, 47% are in the industry and services sector, followed by 31% in banking and insurance and 12% in the public sector.

Some other key takeaways from the report include:

  • 54% of risk managers already use an RMIS and report a 71% satisfaction rate.
  • Though a majority of risk managers said they wish to keep RMIS costs at less than €300,000, last year marked the first increase for RMIS budgets totaling more than €1 million (approximately $1.12 million). This trend was largely driven by activity in North America, and a 2% increase is projected for 2019.
  • Ease-of-use is still the main criteria for selecting an RMIS tool. The market is seeing an increasing demand for “ergonomic and advanced reporting” within the solution.    

According to the report (which can be found here in both English and French), there has been a 60% year-over-year increase in RFP solicitations for RMIS from the international risk management community since 2013. Francois Beaume, AMRAE vice president and VP of risks and insurance at Sonepar, said he expects the trend to continue and noted that the report can serve as impartial guidance to help risk professionals find the right RMIS vendor and system for their organization.

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The report also offers insight on best practices around the RMIS lifecycle from the original requirement design phase to the change management program following implementation.

“Our approach is based on two critical pillars – objectivity and neutrality,” Beaume explained. “As an increasing number of risk professionals seek their first or new RMIS models, they may need help selecting or even adapting them to their own methodologies.”

Panorama also explores the most requested RMIS modules, which range from risk mapping and incidents management to audit. Internal control and audit garnered high satisfaction rates among professionals, both exceeded 80% in cumulatively “meeting” or “exceeding” expectations.

Additionally, the report includes testimonials from six global risk managers on their experiences with RMIS.

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 For example, according to Susan Hiteshew, a RIMS board member and senior director of insurance for the Americas at Marriott International, RMIS systems provide a “one-stop shop for data aggregation, reporting and analysis” that “builds a single source of truth when making decisions.”

To fellow risk managers starting the process, Hiteshew advised, “Rather than reproducing work within the system, companies undergoing an implementation must begin with the end in mind and work backward to build and validate processes to realize the full RMIS value. This helps minimize the execution risk that can materialize and offset the system’s advertised value proposition.

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Francois Beaume was recently a featured guest on RIMScast to discuss the Panorama‘s findings and international market trends. Download the free podcast episode here. 

The Case for Strategic Risk Management

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At last week’s RIMS 2019 in Boston, a group of risk professionals got together for the panel session “NextGen ERM: Strategic Risk Management” to discuss the advantages of strategic risk management (SRM) and the challenges to successfully integrating it into organizations.

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The panel examined several major organizations that have taken shortcuts with training or even rushed to out-duel a competitor, failing to consider the long-term impact on strategy, reputation and market-share. Blockbuster, Kodak and Sears failed to innovate, and these once-thriving name brands are now prime examples of SRM’s benefits.

“Blackberry is one such company, but there are countless examples of organizations that have overlooked the long-term strategic impact of their actions,” said Marian Cope, owner of CopeRisk LLC.

Despite recent corporate missteps tied to failures in long-term strategic analysis, as recently discussed in Risk Management, risk professionals still face resistance to their SRM initiatives. “Demonstrating the value of SRM has to be a priority for risk professionals if they hope to gain buy-in from leadership,” said Rick Roberts, director of risk management and employee benefits at Ensign-Bickford Industries and a former RIMS president.

One of the value propositions of SRM—and an easy one for leadership to support—is the focus on taking advantage of risks that can accelerate the achievement of strategic objectives. “Artificial intelligence is an example of a disruptive technology that is impacting many industries. But, if your organization is aware of it, understands its usefulness and has developed a plan for it, it can give you a competitive edge,” said Marian Cope, owner of CopeRisk LLC.

But the case for an SRM initiative should not just be made with cautionary tales of organizations that did not use SRM. “Don’t just share failures, it’s also important to share SRM successes,” said Ellen Dunkin, senior vice president, general counsel and chief risk officer at Amalgamated Life Insurance Co. “Even Amazon and their business model that gives consumers almost instant access to their purchases has adjusted its strategy and started to open brick-and-mortar shops.”

According to the panel, the risk professional should ideally be involved in strategic planning from the get-go. “Some organizations have a chief risk officer that participates in the preparation as well as the strategic planning and decision-making discussions. Unfortunately, that’s not the norm,” Cope said.

The panel identified the next-best option for risk professionals, which is to work from the strategic objectives established by the organization. From there, they need to analyze the business model, identify, assess, and prioritize the risks that can derail or accelerate achieving the strategic objectives, facilitate the development of appropriate risk responses, and then align such objectives, risks, and risk responses with operations.

An effective SRM program will incorporate plans for a risk strategy, communications strategy, implementation, and training with the goal of integrating strategic risk management into decision-making processes. “The risk professional is going to require support from others in the organization too.

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They’re going to need risk champions to vouch for them, as well as a final presentation that includes achievable and measurable deliverables that demonstrate the value of the process,” Roberts said.

SRM can be a stand-alone program or a component of ERM. Regardless, the panel noted that SRM is vital to the long-term success of organizations as alignment of strategy and operations results in the identification of opportunities to accelerate achievement of strategic objectives and prevents operational blunders that will trigger strategic risks (e.g., substantial reputational harm). Accordingly, SRM as a stand-alone program allows risk professionals to add more value while streamlining the process.

“SRM is the next generation of ERM and identifies external and strategic risks as opposed to the more granular view for ERM. It allows the team to bring the top 10 key risks to leadership, with a focus on the top two to three as opposed to overwhelming them with the full risk register that could include 100,” said Ellen Shew Holland, higher education practice leader for Hanover Stone Partners LLC and president of Strategic Risk Frameworks LLC.

Ultimately, the group agreed, SRM will help fully integrate risk management programs into an organization’s business model and the value should be evident in each positive step the business takes toward achieving its strategic objectives.

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Q&A: 2019 Risk Manager of the Year Luke Figora

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Luke Figora, senior associate vice president and chief risk and compliance officer at Northwestern University, was named the RIMS 2019 Risk Manager of the Year today.

With annual revenues of approximately $2.5 billion (reported in 2018) and nearly $700 million in sponsored research annually, Northwestern is among the country’s leading research universities. Figora has risen quickly through the ranks at Northwestern, where his enterprise risk management (ERM) framework has elevated its risk culture across three campuses—two in Illinois and one in Qatar.

Figora spoke with Risk Management Monitor about his experience as one of the youngest stakeholders among Northwestern’s leadership, his process of customizing an ERM matrix and his reaction to the recent college admissions scandal.

Risk Management Monitor: You and your department created an ERM matrix in the past year that united Northwestern’s compliance owners and that may even set a precedent in higher education. What went into its creation?

Luke Figora: We spent a lot of time defining risk appetite statements and tried to make our program a little more outcome-based and actually show how we’re moving the needle on uncertain key risks for Northwestern. And we avoided spending too much time aligning perfectly to one of the ERM frameworks like COSO or ISO. So I think if someone looked at our program from the outside, it might not check all the boxes from a typical model perspective, but it’s driving action here at Northwestern and it seems to be the right level for engagement with our stakeholders.

I think one of the biggest challenges for ERM at Northwestern—and maybe this is true across the industry—is that we don’t necessarily have one strategy right now. We have some pillars and values that Northwestern follows, but we’re ultimately a very decentralized institution that has a number of schools, and a number of units in each one of those have slightly different objectives and goals.

RMM: It seems that there is a degree of transparency, but not full transparency.

LF: Right. For example, athletics and the School of Medicine have very different risk profiles and neither one of them should know the other’s risks or operations. And it would be hard for someone in athletics to speak about the risks of animal research within the School of Medicine. I think that’s where our risk office plays a role in right-sizing the expectations and taking the feedback from all the units, but trying to do some triage through that.

RMM: Many of your colleagues are several years your senior—how has that impacted your work?

LF: I am probably the youngest person on the leadership team across the institution, but it has probably been beneficial. I have tried to bring different ideas and update the ways in which we think about risk. I’m not jaded by the insurance industry, and I think people are receptive because of that.

RMM: Since arriving at Northwestern nearly five years ago, you moved up the ranks relatively quickly, although you’ve maintained that was not your goal. How would you advise young risk professionals as they get their feet wet?  

LF: I think all of us at early stages in our careers can’t wait to be a manager and want that vertical growth and the chance to lead a team, but the bigger driving factor for me has been horizontal growth and expanding the portfolio. After that, I believe the other opportunities will come. That is a belief I try to hammer home in my work and when I make industry presentations.

RMM: The college admissions system is a hot topic due to the major scandal that broke in March. How might that have affected where the admissions process is on Northwestern’s risk register?

LF: Last year at this time, fraud in the admissions cycle wouldn’t have been one of our top 10 enterprise risks. But when things like this break, there is a tendency to go into reaction mode and examine whether we have similar issues. I always try to keep people level-headed and remind them that just because this hit doesn’t mean it moves to number one on our crisis management list for the year. It is worth doing a deep dive into the question or topic that’s in the news, but whenever scandals hit, I think we’ve tried to approach them with a rational view.

RMM: It sounds like the knee-jerk reaction is to go into crisis communication mode, even though it’s not your crisis.

LF: We know we’re going to get questions from our trustees, so there’s an initial all-hands-on-deck mentality. You have to make sure you have talking points that outline how we’ve thought about it because we know we’re going to get questions from the media. We do focus on crisis communications, but it becomes more about knowing if we have the right controls that could protect the institution from something like this happening to us.  

Figora was also the special guest on this week’s RIMScast, which you can download here.