企业风险管理

Enterprise Risk Management:

Current Initiatives and issues

Journal of Applied Finance Roundtable

Financial Management Association International

October, 2007 Annual Meeting held in Orlando, Florida

Panelists: Bruce Branson, Pat Concessi, John R.S. Fraser, Michael

Hofmann, Robert (Bob) Kolb, Todd Perkins, and Joe Rizzi

Moderator: Betty Simkins

I. Introduction

•Betty Simkins: Good afternoon. Vm Betty Simkins,

co-editor of the Journal of Applied Finance and moderator

of this roundtable. In this session, we will talk about the

current initiatives and issues in Enterprise Risk Management

(ERM). I view ERM as a natural evolution of risk

management that looks at ail risks across the organization,

not just narrow "silos" of risk as viewed in the past. ERM is

an important discipline that is gaining popularity and

Bruce Branson is an Associate Director of the Enterprise Risk ManagementInitiative and Ptvfessor in the Department of Accounting at North CarolinaState University in Raleigh. North Carolina 27695. Pal Conce.ssi is aPartner in Global Energy Markets with Deloitte and Touche. LLC,Toronto. Canada M5H 3T9. John RS. Fraser is the Chief Risk Officerand the Vice President of Internal Audit at Hydro One Inc. in Toronto.Ontario M5G 2P5 Canada. Michael Hofmann is a Vice President and theChief Risk Officer at Koch Industries. Inc. in Wichita. Kansas 67220.Robert (Boh) Kolb ix the Frank W. Considine Chair in Applied Ethics atLoyola University Chicago in Chicago. Illinois 60626. Todd Perkins isthe Director of Enterprise Risk at Southern Company, ¡nc. in Atlanta,Georgia 30308. Joe Rizzi is now the Senior Investment Strategist atCapGen Financial in New York. New York ¡0017. At the lime of theroundtable discu.ssion. he was the Managing Director of Enterprise RiskManagement at Bank of America and La Satte Bank in Chicago. Illinois.Betty J. Simkins is the Wiltiams Companies Professor of Business and anAssociate Professor of Finance in the Spears School of Business atOklahoma State University- in Stillwater. Oklahoma 74078.recognition with many companies and also in the educational

process with universities.

Let's first begin with a definition of ERM to set the stage

for our roundtable discussion. A good place to start is with

the Committee ofSponsoring Organizations of the Treadway

Commission (COSO) definition, which defines ERM as: "a

process, effected by an entity's board of directors,

management and other personnel, applied in strategy setting

and across the enterprise, designed to identify potential events

that may affect the entity, and manage risk to be within its

risk appetite, to provide reasonable assurance regarding the

achievement of entity objectives." '

Surveys show the number of U.S. firms saying they have

fully implemented enterprise risk management (ERM) tripled

to 12% in 2007 from 4% in 2006.^ Some companies have

had little or no success while others have had extensive

success with ERM. Several universities through education,

research, and executive programs are active in the enterprise

risk management initiative.

In our roundtable discussion, we wilt start off with a general

' See page 2 of Enterprise Risk Management - Integrated Framework,Executive Summary, by COSO. September 2004.

' See The 360'' View of Risk: Excellence in Risk Management IV by theRisk and Insurance Management Society (RIMS) and Marsh: New York,2007,115

116JOURNAL OF APPLIED FINANCE — SPRING/SUMMER 2008

introduction to enterprise risk management including how

and why it is important to companies and education; the

benefits, value, and education initiatives; and key organization

structures, designs, processes., and best practices. To

summarize, we will discuss the following six questions in

this session:

Question 1: How do you define ERM?

Question 2: Where is your company or university in the

ERM process?

Question 3: Let's talk about the taxonomy of risk,

particularly operational risk. It seems that too many diverse

risks get classified into this category (i.e., human frailties to

unethical board members and corporate officers, etc). How

does your firm or university deal with these issues?

Question 4: What can universities do better in educating

students on ERM? What would firms like to see their new

employees know about ERM? What specific skills are most

desirable?

Question 5: (For the corporate panelists) Do you think

ERM contributes to shareholder value at your firm? If so,

how?

Question 6: Are there organizational structures, designs,

processes or best practices that you believe are key for

effective ERM implementation?

Question 7: How do you make ERM actionable and keep

your ERM program dynamic?

Question 8: Do you have research ideas for academics?