CIOReview | | 9 DECEMBER 2024For the past 25 years, ERM has been the subject and topic of every major management consulting firm worldwide. Some of the greatest management consultants and scientific minds have mined data to derive the scope of where risk exists and how to eliminate or modify itThe question is where is your O-ring?For the past 25 years, ERM has been the subject and topic of every major management consulting firm worldwide. Some of the greatest management consultants and scientific minds have mined data to derive the scope of where risk exists and how to eliminate or modify it. The following may be a simpler and user-friendly overview.Profits directly result from supply and demand, and targeted profits are derived from efficient work processes. Whether you are building cars, software platforms, power infrastructures, or toys for children, it's the process. The challenge is to identify and manage the process.While conducting the ERM process, you must research each part of your operation, including the minor details, like raw materials, manufacturing equipment, skilled labor, facilities, environmental conditions, finances, governmental controls, market demands and changes. Let's start the process. · Define and Identify Risk: This goes back to Single Points of Failure. Identifying risk and SPF comes from within, talking with the people doing the job.· Action Committee: Once you have defined and identified your risk, build a team of representatives from every level. I once had a low-level dock worker tell me that if we did not protect our trailer bays, someone was going to fall and hurt themselves. (O-Ring moment)· Broadcast: Everyone needs to know the plan, how it was developed, and, more importantly, how it will be implemented. Lastly, everyone has a place at the table.· Everyone is Responsible: ERM has no hierarchy. Of course, there is a team that monitors and communicates the process. It's everybody's job to ensure that the process is understood and followed. I will now throw in one of my favorite management gurus, Peter Drucker. "What Gets Measured, Gets Changed." · Try, Fail, Correct: Do not expect this process to work the first time. Be flexible, analyze your results, and do they meet your original expectations. Make incremental changes, which reminds me of the Fortran programming language, which uses the process of "If, Then, Else." It is an old programming language, but the basics still hold true. · Measure Yourself Against Yourself: I was once told that if you monitor your competition, you look in the rearview mirror. Your development of goals, outcomes and associated risks are solely based on your company, not that of others. I greatly respect the many management consultants, scientists, accountants, and academics who have dedicated their careers to the ERM process. Having an undergraduate degree in Management Science, I received an outstanding education dedicated to the process of all forms of management. However, only when I was in the weeds did I realize the necessity of knowing and understanding the entire process of what we were doing. Most importantly, where were the Single Points of Failure? Who or what could stop the process, limit the projected outcomes, and affect profitability? Lastly, I will leave with a mantra I have had my entire career--an old Chinese Proverb--"If We Don't Change Our Direction, We Will End Up Where We Are Headed." Therefore, don't rely on the current to protect the future.
< Page 8 | Page 10 >