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Enterprise Risk Management ITS 835

Dr. Ronald Menold [email protected]

Chapter 34 Building an ERM Program at General Motors Case Study

ITS 835

Introduction

▪ Background

▪ GM approach to ERM

▪ Game theory

▪ Looking forward

ERM at GM Background

▪ ERM program began in 2010

▪ ERM to help achieve competitive advantage – New CEO – GM bankruptcy in 2009

▪ CRO appointed – Financial and Risk Policy Committee formed on board of directors

▪ Risk officers identified and aligned to all CEO direct reports

▪ GM embraced aggressive ERM

GM Approach to ERM

▪ ERM built on GM’s vision – Design, build, and sell the world’s best vehicles

▪ Identify and manage key risks – Bottom up approach – Focus on “what can go right”

▪ Lessons learned – Gave responsibility of assessing risk probability and impact to senior executives – Replaced ranked risk list with tiered list – Implemented a 5 point scale to measure (minimal to critical)

▪ Inherent risk ▪ Current risk ▪ Residual risk

GM Risk Management Process

Risk Scales

Risk Template

Game Theory

Looking Forward

▪ Top risk attention in place – Ready to add focus on day to day operational risks

▪ Developing program for operational control self assessment (CSA)

▪ Approach is a policy based CSA – Starts with simple yes/no questions to line managers

▪ Benefits of a policy based program – Policy can be leveraged to ensure results – Helps to educate teams on larger scope objectives – Ensures that policies are current and effective

Chapter 34 Building an ERM Program at General Motors Case Study

ITS 835