Here’s a situation that is all too common…
A company hires a new director for ERM. This person’s job is to design and implement an ERM process for helping executives make risk-informed decisions and understand threats and opportunities to achieving strategic objectives.
At some point, this ERM Director decides to leave the company and the process breaks down and ultimately fails.
Why is this? Why does it seem like all of the months and years of hard work were for nothing?
The reason is because the processes revolved around a single person and their preferences and knowledge.
Your company likely (hopefully) has processes for handling power outages, inclement weather, or some other disruptive situation – it’s called business continuity. You may even be personally involved in developing these plans.
As an ERM manager or director though, you also have to think about business continuity risk for ERM.
What happens if you are “hit by a truck” or get a job offer you can’t refuse? Will the process you helped create stand on its own in your absence?
In the end, ERM processes at a company must transcend any one individual…others must be able to pick up where you left off. If those who come after you have to completely reinvent the wheel, executives will come to see ERM as a nuisance rather than a vital element to sound decision-making.
To avoid this fate, here are seven tips for reducing business continuity risk for ERM to ensure it remains a valuable part of your company’s strategic planning in the event you are no longer at the helm.
1. Tailor ERM activities to the speed and tempo of the company
In today’s dynamic, tumultuous, fast-changing world, executives need a robust ERM process to ensure sound decision-making. But in order to offer valuable insights at this crucial stage, any ERM-related activities must match the speed and tempo at which executives and the company make decisions. If executives have an idea and make decisions quickly, a slower ERM process involving extensive interviews and all day meetings will be frustrating and ultimately abandoned.
2. Step outside of your comfort zone
Studies like this one from Yale confirm that remaining in your comfort zone causes the parts of the brain responsible for learning to go idle. Continually improving and learning is crucial for building ERM into a valuable decision-making tool. For example, you may prefer surveys when an interview is more suitable for achieving this end. Sometimes executives take their knowledge for granted, which is why it’s important they are also pushed slightly outside their comfort zone. They may learn their original idea would have been a disaster.
3. Don’t follow personal preferences, but do what’s good for the organization
We all have our preferences on how to do something, but ERM isn’t about anybody’s preferences, but what the Board and executives need. You may be more of an introvert who prefers surveys over interviews or have executives who prefer a certain type of report. But are either of these preferences really what the company needs? A while back, I heard a story from someone working for a health insurance company. The ERM Director and his team would conduct interviews because that was their preference and in their comfort zone. The ERM team was eventually dissolved because there were never any outputs or reports to help executives in making decisions.
4. Hire the right support personnel
Closely linked to #3 above, you may have a specific skill set that is part of the ERM process but still recognize that you need some assistance in other areas. Don’t feel like you have to know everything about ERM and the company in order to do your job effectively. If you’re one of these types of people, please stop putting this pressure on yourself. Rather than understanding every nook and cranny , an ERM Director has to be able to read the organization’s culture, understand the strategic planning and other processes, connect your team to the right people in the organization, plus find and manage the right people to get the job done. We’re all human – we all have our strengths and weaknesses. As an example, if you deeply understand analytics, find someone who is great at face-to-face interactions for interviews.
When reviewing candidates for ERM support roles, be sure to focus on individuals who complement your weaknesses. Remember, you don’t need to be the smartest person in the room; you just need to find those people and have them on your team.
5. Account for personalities
One of the essential skills of an ERM manager is being able to read people and proceed accordingly. If executives prefer to be deliberate in their decision-making, interviews may work for example. But if they prefer to make decision quickly and move on, you may have to find other methods, like surveys. In this case, don’t plan on all day meetings – people will get frustrated very quickly. As Julian Talbot explains in this session at Risk Awareness Week 2019, CEOs and other executives don’t particularly care about the process itself, but rather “Will this work for us and will this improve our decision-making? Will this give me [the CEO] the information I need to make better decisions? Will it give me a sense of confidence that the people who work for me and with me and the people I answer to got what they need to make a decision.”
6. Match your depth of analysis or interviews to resources
You may want to solicit input from everyone in the company, but is that really feasible or even necessary? Conversely, will only talking to the VP level yield a report that just re-hashes what they already know? To ensure the ERM processes you set up are sustainable in the event of your departure, you have to examine every part of the process and determine if it’s sustainable. You may want to do 100 interviews a year, but is it possible to conduct the interviews, aggregate the information, and produce an outcome or report that will be valuable to decision-makers?
Another way to think about this is to keep it as simple as possible while still delivering the needed information. There could be steps that you can remove from your process that are unnecessary or don’t add any value. When you remove those steps, you free up some of your ERM resources to tackle more critical areas.
You have to examine every part of the process, not just the top-end. And if you’re concerned about having enough information, just remember former Secretary of State Colin Powell’s 40/70 rule, which states: Any decision should be rendered when you possess between 40% and 70% of the available information. Why? Because relying on less than 40% information is reckless, while trying to gather more than 70% turns into analysis paralysis.
7. Don’t document process until you know what works
One important task for reducing business continuity risk for ERM is documenting the processes you’re developing. However, it’s important to resist the temptation to document everything you do as you do it. An ERM program isn’t built by writing a policy manual, but instead through trial and error and experimentation. Once you know what works for your company, then go and document. If you write a manual in the beginning, before you know if the process actually works, the ERM process will not be sustainable in the long run, especially if you move on to a new role or company.
These are just a few general considerations for addressing business continuity risk for ERM. It’s quite possible there are other company-specific factors you will need to consider to ensure ERM lives long after your departure.
Is ERM at your company built around one person, or is it set up with the long-term in mind?
Has your company abandoned ERM because the process was unworkable after a key director or manager left?
To share your thoughts on this important topic, please leave a comment below or join the conversation on LinkedIn.
And if your company is struggling to pick up the pieces or would like to ensure it is addressing business continuity risk for ERM in an effective way, please feel free to reach out to me to discuss your specific situation today!
Featured image courtesy of Alex Powell via Pexels.com