8CIOReview | | DECEMBER 2024IN MY OPINIONBy Ron Adams, Vice President of Risk Management, NFPENTERPRISE RISK MANAGEMENTWHERE IS YOUR O-RING?Enterprise risk management (ERM) can be defined as a holistic approach to understanding and monitoring any business operation. This process can be highly defined with multiple disciplines involved or as simple as balancing your checkbook. Understanding where you are and where you seek to go is an ongoing assessment process. While these are universal understandings followed by every successful business, all marketplaces are highly competitive and complicated. While most of us felt safe from distributions that would affect our daily lives, little did we know that a big one was coming--the pandemic. The 2020 pandemic and the worldwide disruptions in supply chains and raw materials influenced everyone. Not just a few, everyone. Did anyone predict such an event? Probability, not to the extent it played out. Who would have predicted fights over toilet paper? In the case of one company that I work with, multi-million projects were delayed due to the availability of screws from China that cost pennies. While we will review ERM in greater detail in this article, I wanted to introduce a major point to consider that can affect your ERM strategy--single points of failure (SPF). While analyzing your operations during the ERM process, identifying SPF is critical. I enjoyed working with NASA and their insurance program in the early 1980's. This was my first introduction to SPF and the critical nature of understanding the impact of identifying and monitoring how SPF can impact the operation and outcomes of a complex process. If you just have limited knowledge of the shuttle program, you can only consider the millions of factors, equipment, and designs that went into the process of designing and placing the program into full operation. Who would have known that a simple backup O-ring failure would have caused such a major disaster? Ron Adams
< Page 7 | Page 9 >