ERM Programs Still Lacking Despite Crisis
Executives and employees have little training and understanding of aggregate risk, reports say.
The global financial collapse should have sent corporate executives running to implement enterprise risk management (ERM) strategies, but so far it hasn’t.
That’s the conclusion of two recent reports by KPMG and the Risk Management and Insurance Management Society (RIMS) that both issue wake-up calls for corporations to revamp and strengthen ERM practices. “This is an imperative that says, in order to prevent another financial catastrophe, organizations must change the way they think about risk and consider implementing an enterprise risk management program or improve the one they already have in place,” warns Joseph Restoule, RIMS president and head of risk management at NOVA Chemicals Corp.
Most companies remain out of the loop. For example, when KPMG asked 130 audit executives and board members about their ERM strategies, the consulting company found deficiencies around risk culture. Almost 60% acknowledged that their companies’ employees had little or no understanding of how to assess risk.
What’s more, despite repeated warnings that ERM’s success depends on support from the C-suite as well as board members, one-third of the corporate executives interviewed by KPMG said that the top leaders at their organizations had no risk management training or guidance, with only 16% receiving frequent or at least annual training. That’s unfortunate, says Restoule: “The key to successful ERM practices depends on certain behavioral attributes of the organization at all levels.”
John Farrell, KPMG’s lead partner for ERM comes to the same conclusion. “When ERM programs miss the ‘behavioral’ piece of the equation, there is no foundation for critical thinking and judgment around decision-making," he says “All executives—particularly senior management—must understand the risks facing their organization in order to help define their company's risk appetite and effectively manage risks.”
The just published RIMS report, The 2008 Financial Crisis: A Wake-up Call for Enterprise Risk Management, also blames risk management failures on an over-use of financial modeling, an over-reliance on compliance and control, the lack of understanding about risk tolerances and failure to incorporate state-of-the-art technology. Indeed, just one-fourth of the respondents to KPMG’s survey said their companies apply technology to their ERM programs. Another 25% said they are considering technology purchases in this area.
Once the “tone from the top” is established, KPMG suggests aligning the process to strategic objectives to drive business value. To revamp and strengthen ERM, companies need to establish a single view of risk, with a common risk language, categories, evaluation factors and response options, and also make sure internal auditing resources are spread across the company. Programs that aren’t enterprise wide are doomed to failure, Farrell says. “When risk management is siloed without one person or team owning the process, no one has visibility to aggregate exposures and accountability for the decisions and risk interrelationship can’t easily be identified,” he says.
Financial Executives: Keeping Track
Douglas Benn, Thomas B. Cusick, Christopher J. Stephens Jr., Richard F. Westenberger, Lorne E. Phillips…
The Cheesecake Factory Inc., the Calabasis Hills, Calif., restaurant chain with 2007 sales of $1.56 billion named W. Douglas Benn, 54, executive vice president and CFO, replacing interim CFO Cheryl Slomann, 43, who is vice president, controller and chief accounting officer. She stepped into the interim position after Michael Dixon, 46, resigned in July. Benn most recently served as CFO of Rare Hospitality International, which owned the LongHorn Steakhouse and The Capital Grille, prior to its 2007 sale to Darden Restaurants.
Columbia Sportswear Co., based in the Portland, Oregon, with 2007 sales of $1.36 billion, promoted Thomas B. Cusick, 41, to the post of executive vice president, CFO and treasurer. Cusick, who joined Columbia in 2002, most recently served as chief accounting officer and was corporate controller before that. He replaced Bryan L. Timm, 45, who was promoted to chief operating officer in May 2008 and was named executive vice president in October. Before coming to Columbia, Cusick held various financial positions at Cadence Design Systems.
Barnes Group Inc., the Bristol, Conn.-based aerospace and industrial components maker and logistical services company with 2007 sales of $1.44 billion, appointed Christopher J. Stephens Jr. senior vice president of finance and CFO. He takes over from acting CFO Francis C. Boyle Jr., vice president and controller, who was named vice president of finance and chief accounting officer. Stephens has more than 20 years experience with Fortune 500 companies, including serving as president of Honeywell’s consumer product group, CFO of Honeywell’s transportation systems business and CFO of Boeing Satellite Systems.
Carter’s Inc., the Atlanta infant and children’s apparel maker with 2007 sales of $1.41 billion, hired Richard F. Westenberger as executive vice president and CFO. He replaces Michael D. Casey, who last June was named chief executive of Carter’s after Frederick Rowan II retired. Westenberger joins the company from Hewitt Associates, where he was vice president of corporate finance and treasurer since 2006. Before that, he was senior vice president and CFO of Land’s End Inc.
Pioneer Drilling Co., the Spokane, Wash., contract drilling services provider with 2007 sales of $416 million, selected Lorne E Phillips, 37, to be executive vice president and CFO. William D. Hibbetts, who will continue his role as a senior officer in the finance and accounting department, previously served in that position. Phillips, with 14 years experience in the oil services industry, spent the last 10 years at Cameron International Corp., where he was vice president and treasurer.
Guarding Against Damaging the Network
MRI 3.0 views show various changes and their impact on the network.
With IT staffs shrinking even as compliance requirements swell, companies want ever more sophisticated diagnostic capabilities to protect against malicious or inadvertent network changes that can lead to costly downtime. Netcordia, an Annapolis, Md., vendor of network configuration and change management software, says its new NetMRI 3.0 offering fills that need.
“For companies to survive in this economy, they need to do more with less, yet continue to uphold strategic network initiatives, such as assuring adherence with industry regulations like PCI [payment card security], HIPPA [Health Insurance Portability and Accountability Act] and Sarbanes Oxley,” says Jim Frey, a senior analyst at Enterprise Management Associates.
Version 3.0 provides a single view of changes made to the network, showing who, when and where they were made, according to Don Pyle, Netcordia CEO. Its dashboard views also show the impact of those changes and resulting tradeoffs from policy compliance to overall network health.
Ask for 'Payment Due' Around the World
CheckFree 6.2 extends multi-lingual capabilities in billing and revenue management.
How do you say “payment due” in Japanese? CheckFree, part of Fiserv Inc., has unveiled a client billing and revenue management product that lets international companies generate invoices in languages such as Kanji and Chinese. CheckFree Advantage Fee 6.2 lets corporations’ far-flung units work seamlessly together using local languages to manage the revenue process and billing requirements, the company says. The technology also extends the multi-lingual capabilities to user screens, reporting and data import functions.
“Many institutions have a global requirement to streamline and automate billing processes to prevent revenue leakage by consolidating global client invoicing processes onto a single platform, while keeping flexibility for local customization,” says Geoff Harries, vice president, product strategy, CheckFree Investment Services Software, in Brookfield, Wis. CheckFree 6.2 solves that challenge, Harries says.