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ITS835_Spring_1G_2019_Week6.pptxITS 835 Enterprise Risk Management
Week 6:ERM Mini case studies
1
Week 6 – ITS 835
Read the following chapters
Chapter 26, “Bim Consultants Inc.”
Chapter 27, “Nerds Galore”
Chapter 28, “The Reluctant General Counsel”
Chapter 29, “Transforming Risk Management at Akawini Copper””
Complete the following no later than end of day Monday Feb 18
Post to week 6 discussion
Chapter 26, “Bim Consultants Inc.”
Real scenario of a company faced with an important strategic acquisition decision
Demonstrates the complexity of making strategic decisions and how greed and ego can cause a firm to change the strategy that may put the business at risk
The company
Medium-sized consulting firm, been in business for 30 years
Corporation with 30 partners
10 offices across Canada, 3000 staff
Customer focus priority
Salaries on the low end, but bonuses can be quite high
Sound balance sheet
However revenue has been stagnant
Strategic Goals
Strategic decision to move on with customers as the number one focus
Explore how to increase revenue from existing clientele
What additional services could be provided
Strength was the blue-chip customer base
Selling a minority share of the company at a large multiple
Chairman received a call from Bravado International (competitor) to consider an offer to sell the Canada subsidiary
Context
Chairman called executive meeting
Made a case for the purchase showing how it would double sales
Strong marketing thrust
The executive committee agreed
President of Bravado cautioned the chairman to keep the negations very confidential
Points to consider
Is this decision aligned with the strategic goals of the company
Is there an influence of greed and ego on behalf of the chairman
How well does this deal fit with the current business model
Why is Bravado pulling out of Canada
Is a risk assessment necessary prior to proceeding
Chapter 27 Nerds Galore
Based on fictitious small services company that appears to be on the verge of a major downturn
Focuses on human-related risks
Risk assessment in making the decision to proceed with the HR strategy
Context
Canadian service company with 1000 employees
Head office in Edmonton, Alberta
Full service IT support to small and medium sized company
Recently company facing problems with customer satisfaction and employee turnover
Problems- steady decline in customer service
Employee Turnover
Financial Performance
Strategic Targets
Risk Workshop
Inability to recruit people
Loss of staff with key internal knowledge
Uncompetitive labor productivity
Increased departures of skilled technical staff
Loss of key business know-how
Points to Consider
Brief case study but the problems are relevant and complex
Risk assessment can used to identify gaps
How well the proposed strategy address the risks
Risk management is about uncertainty
ISO 31000 definition of risk is “effect of uncertainty objectives”
Chapter 28, “The Reluctant General Counsel”
Implementation of ERM at a software company
Demonstrates the challenges that are involved when the general counsel of the company has reservations and does not support the implementation
Context
Global software company headquartered in Silicon Valley, California
Head of internal audit has been tasked to learn the ERM effort
CEO and CFO in full support of the effort
Plan is to have Jason, the head of internal audit lead the effort for 1 year and then consider hiring a full time risk officer
ERM developments
Jason holds one-one-meetings with CEO and CFO’s direct reports
Unable to meet with EVP and general counsel
Develops an initial list and assessment of the significant areas
There is a concern that the direct reports identified same level of risks with different potential impacts and likelihood
Assign each area of risk to individual executives
General Counsel- Legal department
Strong concerns
Technology companies routinely engaged in law suits
Protection of intellectual property with high settlements
Company listed on U.S exchanges and is subject to SEC filings requirements
Concerns of excessive disclosures
Points to consider
A good example of the roadblocks presented during ERM implementations
Should Jason accept a ERM without the legal department involvement
Are all of the general counsels valid
Laws are in place for the best interests of all stakeholders
How can Jason handle the situation
Chapter 29 Transforming Risk Management at Akawini Copper
How the approach to managing risk can be transformed and enhanced in a company
Hypothetical mining company
Draws on practical concepts of ISO 31000
Shows how a weak approach to risk management can be enhanced
Context
Akawini Copper is acquired by United Minerals
Akawini owns a single mine and earns annual revenue of $774 million with 1500 employees
United Minerals has a well structured approach to risk management based on ISO 31000
United Minerals find several issues with the current risk management process at Akawini Copper
United Minerals framework placed on transformation plan and given a high priority
Risk Management Transformation Process
Desired Framework
Transformation – Highlights
Gaining senior management ownership
10 Performance Requirements
Points to consider
Documentation review
Interviews
Senior management involvement and ownership
Performance measures
This week
Ensure to complete the week 6 discussion no later than Monday Feb 18 end of day
