Experts Agree: Enterprise Risk Management is Critical

This week, an article was published by Wharton Business School about the need to re-think approaches to risk management.  The article presents the case that risk management approaches are not necessarily broken, but need to evolve to the next level.  That next level is adopting a true enterprise risk management focus.  Here is a summary of their view along with that of an executive at a major global corporation.

Experts at Wharton and elsewhere argue that too much blame is being placed on the risk management model and other tools of the trade, in banking and beyond. The models are not necessarily broken, but instead are only as good as the decisions that get made based on them, they say. As a result, the current crisis may represent an opportunity for companies to re-visit and re-think historical approaches to risk management. 

Philippe Hellich, vice president of risks, control and audit at Danone, is already moving to the new model. "We use very few mathematical models," he says, although the organization is working on a small set of new ones for certain risks. "Instead, we rely much more on interviews and benchmarking with peers outside the group and between our subsidiaries around the world. Our approach is based on listening and challenging the operational management, common sense analysis, sound judgment and good governance at the top."

Looking ahead, Hellich sees even more focus on risk from Danone's leadership, a consequence of the increasing volatility in markets and the potential severity of impact. "Top managers are convinced of the necessity to use enterprise risk management. We now have an effective working session with part of the executive committee twice a year. And we continue to rely on yearly updates of the risk maps of all major business units worldwide."

Wheelhouse Advisors can help your company reach the next level of risk management.  Visit www.WheelhouseAdvisors.com to learn more.