Enterprise Risk Management (ERM) and the Economic Downturn

Nikki Krawitz interviews Janice Abraham, of the University of Missouri System, for Business Officer magazine:

In some ways doesn’t this resemble the SWOT (strengths, weaknesses, opportunities, and threats) analysis that many institutions go through as part of their strategic planning process?

That’s really what ERM is—identifying opportunities and threats in relation to your strengths and weaknesses, but with an added focus on deciding how you will respond. Most of the institutional SWOT analysis I see is focused heavily on assessing strengths. When it comes to weaknesses, the thought or planning is not always as rigorous. And, because SWOT analysis is usually done in conjunction with strategic planning, which may only take place every three to five years, it may not remain as relevant.

So, what is the best way to make ERM part of your institutional mind-set?

ERM is really intended to be part of routine planning processes rather than a separate initiative. The ideal place to start is with buy-in and commitment from the board and senior leadership. I think a good time to start is when we regularly ask people to think about the next year, or the next 5 or 10 years. The annual budget process is [the time] when we make requests to initiate programs or services or begin laying the groundwork for new capital projects, for instance. This is when we should also ask staff and faculty to think about potential risks. Of course, ERM also requires asking how external events or circumstances might impede our ability to meet goals or maintain operations. For example, if fuel prices go up significantly, what maintenance programs will we need to delay? Where will we shift resources to make up the difference? Would we need to consider layoffs? This is essentially about turning your entire campus staff into risk managers in the “big R” sense. I think some try to make ERM too complicated, but this doesn’t have to be a term paper. It can be a one-pager.