Diagnosing ERM Problems

As we emerge from the financial crisis and global economic downturn, many companies are beginning to realize the need for a comprehensive review of their Enterprise Risk Management (“ERM”) programs.  While some executives may think that their program is sufficient, they simply may have a false sense of security because they have just survived the recent crisis.

In reality, most organizations have been focused purely on survival and have allowed their more forward-looking risk management practices to take a back seat.  In addition, in order to weather the financial storm, some companies looked to risk management organizations for cost savings and scaled back their infrastructure and resources.  Ironically, it is the companies that have survived the crisis relatively unscathed that may be the least prepared and the most at risk for a future loss event.

So, how do you know how healthy your ERM program is today?  The best and most reliable way is to conduct an independent, diagnostic review of the program.  A diagnostic review should focus on two main components of the ERM program – the level of desired maturity and the core foundational elements.  First, a company needs to determine what level of maturity they are seeking to achieve.  This is based on a number of factors including the size of the company, the nature and complexity of the business, and the external environment in which the business operates.

After determining the desired maturity, the company should examine the core foundational elements that form the ERM program itself.  A comprehensive review of these elements will help the company understand both the progress toward the desired maturity level as well as the major gaps that may exist in the foundational elements.

Much like an annual physical check-up exam, it is a good idea to perform a diagnostic review of your ERM program on a periodic basis to ensure that it is providing the expected level of risk management discipline within your organization.  Wheelhouse Advisors has designed a quick and effective review to provide companies an independent view at a reasonable cost.  For more information, feel free to email us at navigatesuccessfully@wheelhouseadvisors.com.