erm6

ITS 835 Chapters 26, 27, 28, 29

Mini-Cases on ERM and RIsk Enterprise Risk Management

Professor Miguel Buleje

Overview

• Collection of four mini-cases

• Leaves open ended questions

• Presents real life situations • And needs for ERM

• Mini-Cases • Bim Consultants Inc.

• Nerds Galore

• The Reluctant General Counsel

• Transforming Risk Management at AkawiniCopper

Bim Consultants Inc. • Consulting firm

• 10 offices in Canada

• 3,000 staff

• 30 partners

• Operate with the “Customers are number one” focus.

• But revenue is static

• Opportunity to buy out competitor

• US competitor selling Canadian operation

• Purchase would double size and sales

• Negotiations must be kept confidential

• No option to visit site as part of due diligence

• What types of risk you see as part of the M&A Transaction?

Nerds Galore • Canadian IT service company

• 12 offices

• 1,000 employees

• Grew from founder’s garage

• Shift from small start-ups to medium size customers

• Quickly realized the mid size market is more profitable.

• High turnover of 20% is causing concern in Management

• Decreasing customer satisfaction

• Steady revenue (for now) as a result of having long standing contracts.

• Despite experiencing decreased customer satisfaction, steady revenue.

• Revenue likely to change if satisfaction issue not address ASAP.

• Take a closer look at Risks presented, and what type of ERM framework would serve the needs to address these type of risks?

Nerds Galore, cont’d. • Hired new VP for Humana Resources (HR) • New VP for HR introduced strategy to reduce turnover rates (20%) & to

improve customer satisfaction, as follows:

• Attract the best talent • Retain good people • Manage talent • Optimize the use of people • Rely on outsourcers

• Executive team requested workshop to explore HR risks, as follows: • Inability to recruit people with needed skills • Loss of staff with key internal knowledge • Uncompetitive labor production • Increased departures of skilled technical staff • Loss of key business know-how

The Reluctant General Counsel

• Business Software Corporation (BSC) • Silicon Valley,CA • Annual revenue over $1 billion

• Board wants ERM • Upper management supports establishing ERM

• EVP of development and general counsel • Doesn’t want to be involved in ERM • Risk discussions could be discoverable in lawsuits • U.S. Securities and Exchange Commission (SEC)

• Requires disclosure of risks • Recommendation is to not formally pursue ERM

• What are the risk of informally addressing ERM ?

Transforming Risk Management at Akawini Copper

• Akawini Copper • Mining company acquired by larger company: United Minerals

• Single mine and plant; 50 miles from the coast.

• $774 million in revenue

• 1,500 employees

• United Minerals implemented ISO 31000 framework • Substantially more sophisticated than Akawini’s Risk

Management program.

• Launched project to transform Akawini RM to ERM

• Study around the transformation of Akawinis’ risk management to follow United Minerals risk management framework.