Integrating ERM with Strategy Continues to be a Struggle for Companies

NC State’s ERM Initiative released their 2018 report on the State of Risk Oversight. This report spurs lots of thoughts for me on a variety of topics, but I want to focus today on enterprise risk management adding value to the strategic planning process.

Last year, I wrote about how ERM can be used as a strategic tool for companies, where I discuss statistics from NC State’s 2017 report regarding integration of ERM with strategy:

Only 20% of the 432 respondents feel that the organization’s risk management process is a “proprietary strategic tool that provides a unique competitive advantage.”  Only 20%!

Believe it or not, the 2018 report actually went down a percentage to 19%! To me, that means organizations are running into issues when trying to integrate ERM with strategy OR risk professionals are not clearly communicating and demonstrating the value that ERM can add to the strategic planning process.

This second item is what I questioned last year: Does this mean that as risk professionals, we are not articulating the case for ERM being integrated with strategy?

I believe this is the case based on NC State’s conclusions about this statistic:

[T]here may still be a lack of understanding of how an effective ERM process can be informative to management as they execute their strategic plan, and/or the organization has not developed its process well enough to consider it a proprietary strategic tool.

When it comes to understanding the external risks, a full 32% of responding organizations do only minimal or no formal assessments of emerging strategic, market, or industry risks.

Considering the speed at which the business environment is changing, it’s scary that many for and not-for-profit organizations are not aware of outside risks they should be considering while developing their strategic plan.

If it is scary to me, shouldn’t the lack of knowledge and insights scare the executives and board members as well?!?!

Even an informal, ad hoc process is better than no action at all. For some ideas, check out some of the techniques that General Motors uses to identify external risks.

What is holding you back from integrating ERM with strategy? Are you ready to take your organization to the next level of success?

You are welcome to comment below or join the conversation on LinkedIn.

Please contact me if you need a new perspective on your ERM program or tailored guidance on how to take it to the next level.

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