One issue that executives, Board members, and other company leaders continue to raise in surveys and elsewhere is that ERM doesn’t provide strategic advantage or valuable insights to decision-making. Reports received by business unit and company leaders typically regurgitate a list of risks and rehash what they already know.
As we discuss in this post from earlier this year, the likely culprit for ERM not providing strategic value is that it is set up and viewed as a separate process instead of an integral part of managing the company for success.
While it can be easy to point to this as the primary reason for companies not realizing strategic benefit from their risk management activities, there’s actually an even bigger, underlying issue to address first. You work with business units to understand risks to the organization and generate reports, but you are not invited to the strategic planning meetings, which is where the real value of ERM lies.
To overcome this problem and be an active participant in the direction of your company, you have to change your mindset.
In the end, ERM isn’t about your interests, skills, background, or even managing threats to the company, but rather ensuring goals are met and the company is successful. In his book World Class Risk Management, Norman Marks explains:
The effective management of risk enables more informed decision-making, from the setting or modification of strategy to the decisions made every day across the extended enterprise.
Now I’m going to be a little blunt for a second, but in a nice way.
For ERM to deliver on the promise of informed daily decision-making and be an active participant in setting the company’s strategy, the first hurdle to overcome is you.
I know that may be a little tough to hear. My goal isn’t to chastise you. I raise this issue because it’s often overlooked by even the most experienced risk professional and a lesson I had to learn myself. It took a long time for me to even realize it was even a problem! Sometimes the biggest barriers to ERM success are not readily apparent.
You are excited about ERM and want to share its potential with executives, but they do not appear to reciprocate or share your enthusiasm. To see a shift in how executives react to ERM, you have to change yourself and your mindset.
Despite its importance though, a change in mindset doesn’t come naturally and requires focused effort…the biggest thing to remember is that ERM is not about you but your organization’s success. Once you take this to heart, a few other steps for shifting your mindset include:
- Maintain neutrality – remember that ERM should be a neutral party, meaning you have no favoritism toward particular projects, initiatives, ideas, business units, or people. Your role in strategic planning is to provide your unique perspective since you see things across the organization instead of within a specific business unit or function. With this perspective, you are in a unique position to ask the right questions and ensure the right people are at the table.
- Keeping your ego in check – interactions should not be an “ERM” or “risk” discussion, but rather a strategic planning session you happen to be a part of. As we discuss in previous posts like this one, ERM’s role is like a consultant or adviser…you don’t and shouldn’t have veto rights. You should be providing feedback at appropriate times in the right tone and words, but balance this with listening. Ask what you can bring to the table to ensure the company is making the right decisions. Instead of saying “that’s not a good idea,” say “what I’m seeing/hearing is this” and “have we thought about this?”
- Constant communication and engagement – remind executives and business units throughout the year of your role, the perspective you can bring, and your neutrality. This constant (but gentle) reminder is another important step in changing your mindset and increasing your involvement in strategic planning. Maintaining engagement throughout the year ensures you don’t have to go back and remind them of your role, which can be frustrating. Communication can include one-on-one conversations before planning sessions and reassurance that you play a neutral role. Finding support among executives, or ERM champions, can play a valuable role in growing engagement.
As someone who understands how ERM can be a valuable strategic planning partner, it can be disheartening to see executives and business units simply file reports away into oblivion. You are eager to help your company’s leaders make informed decisions, which should also include targeted risk taking and not just minimizing or avoiding risks.
The first step to getting to this point requires you to have the right mindset. Otherwise, you will always experience frustration of not being an active participant in charting your organization’s future course.
Are you invited to develop your company’s strategy or are you shut out of planning and strategy sessions?
Have you taken any steps to change your mindset or do you focus on processes and procedures?
I’m interested in hearing your thoughts, so please do not hesitate to leave a comment below or join the conversation on LinkedIn.
If you are constantly being shoved aside and frustrated about not having a seat at the table, please feel free to contact me to discuss how we can work together to get you an invite to the table.
Featured image courtesy of Jukan Tateisi via Unsplash.com
