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15BSD17\28610A
JOHN MCLAUGHLIN, MANAGING DIRECTOR, ARTHUR J. GALLAGHER
& CO.
A New Framework for
Risk Management
2
15BSD17\28610A
© 2015 ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERSUNITED EDUCATORS INSURANCE, A RECIPROCAL RISK RETENTION GROUP
“Without guidance an organization’s risk strategy will
be made – and repeatedly redefined accidentally – by
dozens of everyday financial and business decisions.”
McKinsey Survey
Traditional Risk Management
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15BSD17\28610A
© 2015 ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERSUNITED EDUCATORS INSURANCE, A RECIPROCAL RISK RETENTION GROUP
• ERM is a process that seeks to preserve and create value
– Protection of Assets
– Effective Utilization of Resources
– Optimization of Results
• Risk is defined as the effect of uncertainty on objectives
• Ultimate goal is to create a risk aware culture where
consideration of risk is part of the decision making
process
Enterprise Risk Management Approach
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15BSD17\28610A
© 2015 ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERSUNITED EDUCATORS INSURANCE, A RECIPROCAL RISK RETENTION GROUP
• Tone at the top matters; Champions are essential
Principles and Mandate (SAMPLE)
The University is committed to developing and supporting an ERM policy that:
a) incorporates a consistent approach to risk management into the culture and strategic planning
processes of the university that supports decision making and resource allocation at both the strategic
and operational levels.
Or
b) applies a consistent approach to risk management to support the college’s governance responsibilities
for innovation and responsible risk-taking, policy development, programs and objectives. In all cases,
appropriate measures will be put in place to address unfavorable impacts from risks and favorable
benefits from opportunities.
• Understand and embrace specific roles, while building bridges across campus
• Question sacred cows
• Incorporate RM into planning
– Annual, strategic and project planning
– Ask questions, require annual updates, establish accountability
Commitment
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15BSD17\28610A
© 2015 ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERSUNITED EDUCATORS INSURANCE, A RECIPROCAL RISK RETENTION GROUP
A business process that expands the core (traditional)
concepts of risk management:
• Identify risks and opportunities across the enterprise
• Assess the impact of the risks to the plans and mission
• Develop and test mitigation plans
• Monitor identified risks and consistently scan for emerging
risks
• Repeat and improve
Framework
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15BSD17\28610A
© 2015 ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERSUNITED EDUCATORS INSURANCE, A RECIPROCAL RISK RETENTION GROUP
Risk Management
Process (ISO 31000)
Communication
and
consultation
Monitoring and
review
Establishing the context
Risk assessment
Risk identification
Risk analysis
Risk evaluation
Risk treatment
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15BSD17\28610A
© 2015 ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERSUNITED EDUCATORS INSURANCE, A RECIPROCAL RISK RETENTION GROUP
Roles
• Owns ERM
• Department heads involved in operational risks
Senior Administration
• Sets tone, addresses strategic and governance risks and fills in gaps
Full Board/Executive Committee
• Understand programs and risks
Standing Committees
• Owns specific risks and process
Audit Committee
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15BSD17\28610A
© 2015 ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERSUNITED EDUCATORS INSURANCE, A RECIPROCAL RISK RETENTION GROUP
1. Reputational Risk:
a) Assessments and outcomes not meeting expectations
b) Governance
c) Effective crisis planning/communication
2. Strategic Risk:
a) Aging workforce, lack of succession planning
b) Misalignment between operations and strategic plans
c) Expanding mission to four year degree programs
d) Uncertain economic environment
e) IT infrastructure investments
f) Changing regulatory environment
g) Implement Program to support “Full Spectrum Learning”
College Risk Register
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15BSD17\28610A
© 2015 ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERSUNITED EDUCATORS INSURANCE, A RECIPROCAL RISK RETENTION GROUP
3. Operational Risk:
a) Lack of disaster preparedness and BCP
b) Minors on campus
c) Outside violence coming to campus
d) Title IX and sexual assault
e) Cyber Security/Breach Response
f) International risks
College Risk Register
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15BSD17\28610A
© 2015 ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERSUNITED EDUCATORS INSURANCE, A RECIPROCAL RISK RETENTION GROUP
1. Establish Organizational Principles and Mandate -COMMITMENT
2. Establish leadership Structure and Discussion of ermcontext - FRAMEWORK
3. Conduct risk assessment and assign of Risk Owners –RISK ASSESSMENT/OWNERS
4. Begin risk treatment and Organizational integration –RISK TREATMENT
5. Follow Consistent Process to MONITOR and IMPROVE
In To Action (5 STEP PROCESS)
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15BSD17\28610A
© 2015 ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERSUNITED EDUCATORS INSURANCE, A RECIPROCAL RISK RETENTION GROUP
1. Commitment
Building the case for ERM
Discussion of mandate & commitment
Definition of roles
• Begin meeting with ERM leaders to discuss
organizational goals and objectives
• Develop description of benefits and reasons to
implement ERM
• Discuss broad roles of senior administration, risk
management, legal, internal audit, and compliance
• Establish advisory group composition, meeting
schedule and initial agenda
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15BSD17\28610A
© 2015 ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERSUNITED EDUCATORS INSURANCE, A RECIPROCAL RISK RETENTION GROUP
2. Leadership, Framework & Context
ERM leaders and advisory group
establish framework, describe context,
stakeholders, roles and responsibilities,
and implementation plan
• Facilitation of ½-day workshop focused on development
of framework, description of context, identification of
internal/external stakeholders, discussion of risk criteria
and performance measures
• Establish roles and responsibilities of administrators
and other key stakeholders
• Develop implementation plan
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15BSD17\28610A
© 2015 ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERSUNITED EDUCATORS INSURANCE, A RECIPROCAL RISK RETENTION GROUP
3. Risk Assessment & Ownership
Begin risk assessment including scope
and process, assignment of risk owners,
planning for data management, reporting
and communication
• Consult and advise, or facilitate, the risk assessment
process through surveys, interviews, and/or workshops
• Oversee development of risk register in relationship to
organizational objectives
• Facilitate the risk analysis and evaluation/prioritization
process
• Assist in the assignment of risk owners
• Sample reports developed for advisory group, senior
admin, and governing boards
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15BSD17\28610A
© 2015 ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERSUNITED EDUCATORS INSURANCE, A RECIPROCAL RISK RETENTION GROUP
4. Risk Treatment & Integration
Development and approval of risk
treatment plans, training of supervisors,
integration into position descriptions,
reviews, and employee onboarding
• Beginning of work on risk treatment plans including risk
owner training
• Leadership approval of priority risk treatment plans
• Supervisor training materials drafted
• Position description wording drafted and approved
• New employee orientation materials developed
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15BSD17\28610A
© 2015 ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERSUNITED EDUCATORS INSURANCE, A RECIPROCAL RISK RETENTION GROUP
5. Monitor & Improve
Development and incorporation of
continuous improvement model, monitoring
and review of progress, and assessing
communication and engagement
• Review existing ERM program
• Report on congruence with best practices and suggest
improvements
• Evaluate performance management objectives and
outcomes
• Assess progress of risk treatment plans
• Evaluate accountability and reporting chains
• Incorporate lessons learned
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15BSD17\28610A
© 2015 ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERSUNITED EDUCATORS INSURANCE, A RECIPROCAL RISK RETENTION GROUP
Culinary Adventures
College A at the height of the
Arab Spring is invited to a
culinary arts symposium in
Dubai. 2 faculty members and
5 stds. are invited.
Symposium concludes with an
Int’l “cook off’ competition!
College wants to attend but
concerned about safety and
cost.
College B is considering
opening a high end restaurant,
staffed by professionals as
means to attract community
members, support functions at
Performing Arts Center,
expose students to classic
restaurant operations.
Major financial investment
that does not directly
support educational mission.
USE THE ERM PROCESS TO HELP MAKE INFORMED DECISION
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15BSD17\28610A
© 2015 ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERSUNITED EDUCATORS INSURANCE, A RECIPROCAL RISK RETENTION GROUP
Culinary Adventures
College A
• Mission Consistent
• Risk Owner
• Financial
• Reputational
• Strategic
• Compliance
• Hazard/life safety
• Risk Treatment
College B
• Mission Consistent
• Risk Owner
• Financial
• Reputational
• Strategic
• Compliance
• Hazard/life safety
• Risk Treatment
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15BSD17\28610A
© 2015 ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERSUNITED EDUCATORS INSURANCE, A RECIPROCAL RISK RETENTION GROUP
• Focus on high-impact risks
• Focus on mitigation/continuity plans
• Take on the tough issues and sacred cows
• All risks must have owners
• Involve other departments in risk register and responses
• It’s a process and business tool, not a project
• Set yourself up for some near terms wins
Lessons learned from others:
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15BSD17\28610A
© 2015 ARTHUR J. GALLAGHER & CO. | BUSINESS WITHOUT BARRIERSUNITED EDUCATORS INSURANCE, A RECIPROCAL RISK RETENTION GROUP
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