What is enterprise risk management (ERM)? Most people are aware of an enterprise resource planning (ERP) system; now think about a tool to communicate your risk management. This is a complex and labor-intensive process, yet the outcomes can save your organization millions in risk management costs and create more clarity regarding your true total cost of risk.
Many organizations are already performing portions of ERM without knowing it, and taking a few additional steps to formalize the process can make a significant difference to an organization. There are also organizations that think that they have an ERM program, but nothing is actually being accomplished. A key takeaway is that the ERM process never stops, and it must provide tactics that help management.
The purpose of this article is to provide a shortcut to a self-sustaining ERM “light” program. These tips can work for mid-sized and fast-growing companies that don’t have the internal staff to focus on a comprehensive ERM tool.
Most ERM programs have 10 to 12 steps that work in a continuous loop. Step five is typically where a risk management dashboard is designed and implemented. For organizations that don’t have the focus to work through the entire process, one tactic is to skip the first few steps and start in the middle, moving directly to a dashboard.
A common mistake with risk management is that decisions are typically made in a departmentalized vacuum (i.e., CFO, GC, Risk Manager, or VP of HR making risk decisions without a comprehensive overview on their risk profile). A good risk dashboard works as a communication tool between stakeholders; includes benchmarking data against yourself, organizations of your size, and your industry; and reduces isolated decision-making based on incomplete data.
Step 1: Identify the Players
To get people communicating via a risk dashboard, the first step is to identify who will be involved. In mid-sized organizations, these stakeholders typically are:
- Facilities / Operations
- Human Resources
- Insurance Brokers / Consultants
- Internal General Counsel / Legal
- Outside Counsel
- Security / Safety
A dashboard is a document that tracks information important to the stakeholders over time communicating directly with your current ERP system. It shows direction, momentum, and trends. Being a good partner means communicating, and a monthly dashboard is one of the easiest ways to accomplish this.
Every month each stakeholder receives the same graphically driven report, which can be customized to show:
- Benchmarking data by industry or claim type
- Claims by department or location
- Current and historical claims by line
- Ongoing initiatives
- Progress to goals
Technology exists to automate the bulk of the dashboard and send it out monthly. The dashboard is managed by your insurance broker.
Step 2: Dashboard Design
The second step is to gather all stakeholders together and design the ultimate dashboard. The insurance broker typically facilitates the meeting, providing templates for various dashboards.
The process is like choosing apps on a smartphone. Once the “apps” are chosen by the group, they are then customized to fit the organization. The group is responsible for ensuring the dashboard is appropriate for the group, and not information overload.
Once implemented, the dashboard typically becomes the first thing people look at when it arrives in the inbox. Departments want to see how they are trending. The CFO wants to see how the Total Cost of Risk (TCOR) compares to the month before. Risk and employee expenses are a major cost driver for most organizations, and the dashboard provides a method to talk about what is driving the costs.
Communication and data are the key to ERM success, and an effective dashboard is the easiest way to get people talking effectively and thinking about risk.