Not Losing Comes First: A Practical Look at the Challenges of Enterprise Risk Management

Abstract

When I was younger, I spent a lot of time and energy on finding ways for my teams to win, without realizing that this was not the same thing as ensuring we didn’t lose. Experience finally taught me that the latter is actually the greatest challenge facing most companies. According to the U.S. Small Business Administration, only thirty three percent of firms survive as independent entities for ten years or more. Not losing buys the time that companies almost always need to adapt in order to deliver the big wins they hope to achieve for their investors and employees. Not losing is the essential purpose of the mix of activities, including identifying and assessing risks and uncertainties, providing warning of adverse changes, mitigating and transferring potential losses, and strengthening organizational resilience and adaptability, that in recent years has come to be known as “enterprise risk management” or “ERM”. I’ve worked on these issues across a range of industries for more than thirty years – first as a banker, then as a consultant, an investment analyst, and most recently as a corporate CFO, CRO, and CEO. Based on that experience, in this paper I offer some practical insights into the real drivers of success in a discipline that is not only more challenging than most people realize, but also much more valuable.

Keywords: enterprise risk management, risk assessment, practitioner perspective, complex adaptive system

JEL Classification: D81,G30, L20