As payroll services provider Paychex increasingly acknowledged the importance of enterprise risk management, the company decided to go beyond ERM's bottom-line protections to value creation, in effect "turning from defense to offense," says Frank Fiorille, director of ERM at Paychex, which took the bronze award in this category last year.
Like many other organizations, Paychex had implemented a standardized ERM framework to address compliance issues and discern and respond to strategic and operational risks more expeditiously and affirmatively. Fiorille, who championed the ERM initiative at Paychex, says the company has now engaged the next level of ERM–the development of revenue opportunities.
"This is where ERM is evolving toward, taking this infrastructure, team of people, processes and tools used for the most part to manage uncertainty, protect shareholder value and keep the company out of the newspapers, and now leveraging it to actually enhance shareholder value," he explains.
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What Paychex seeks to leverage from its ERM strategy is information that will assist in developing new products and revenue streams complementing its existing products, which have matured. For example, ERM might produce data indicating the market potential of new fees. "There are these arcane regulations now that address the 401(k) recordkeeping area that might provide the opportunity for us to charge a fee that would be accepted in the marketplace," Fiorille says. "ERM would provide a way to generate this idea and then pass it along to other operational areas. In this context, ERM would create a new source of wealth for the company."
At Rochester, N.Y.-based Paychex, the ERM team takes a wide variety of perspectives. Rather than limit the team to discussing only the downside of risk, Paychex has opened up the debate to seeking upside potential–revenue that could be generated "alongside controls," Fiorille says, to "enable ERM to be an even more significant contributor to the Paychex bottom line."
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