Week 14 Discussion - ERM and Use Cases

Gandu 

Discussion-14

COLLAPSE

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The ERM implementation at Workers’ Compensation Fund and Zurich Insurance Group are similar in many ways. For example, both organizations have an established Chief Risk Officer (CRO) with distinct roles. The CRO position at Workers’ Compensation Fund was established in 2010, and the purpose of the office was to develop and monitor the organization’s ERM strategy, processes, and policies as directed by the CEO, the Risk Oversight Committee, and the Board (Fraser, Simkins, and Narvaez, 2014, p. 209-10). Zurich Insurance Group also has a CRO whose central role is to provide the CEO, the Board, and the Risk Committee with risk-related information (Fraser et al., 2014, p. 258-59). Besides having similar roles, the CROs of both organizations report to the same authorities.

Both organizations also have an independent risk audit. At the Workers’ Compensation Fund, auditing is external, and the CRO introduced it in 2011 as a "third-party review” (Fraser et al., 2014, p. 215). Similarly, Zurich Insurance Group consults external expertise on risk matters. For example, the company seeks external knowledge from the Natural Catastrophe Advisory Council (Fraser et al., 2014, p. 261). Zurich Insurance Group, however, has an internal audit function that forms the "third line of defense" in its risk governance approach (p. 256). Another aspect that is conspicuously similar between the two organizations is the role of the Board in ERM. Both companies have a risk committee made up of board members. Workers’ Compensation Fund, the board’s ERM functions are carried out through the Risk Oversight Committee. At Zurich Insurance Group, a Board-level Risk Committee exists, and it defines the Board's Role in ERM. Also, ERM is considered a part of all business operations, including strategic planning and budgeting.

The implementation of ERM depends on the size of an organization and the level of risks it faces. In implementing an ERM, I would follow the strategies used by these two organizations because they offer a clear path to achieving ERM. A step-by-step process used to implement ERM is depicted, and it is initiated and governed by not only the CRO but also the CEO and the Board. In the future, ERM implementation will get better. New risk assessment matrices will make risk identification more comfortable, and the role of CRO's will become easier when all members of the organization, including CEOs and the Board of Directors, assume active roles in ERM implementation.

Reference

Fraser, J., Simkins, B., & Narvaez, K. (2014). Implementing enterprise risk management: Case studies and best practices. John Wiley & Sons.

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