Effective Enterprise Risk Management Starts With A Conversation

As policymakers assess the causes of the recent fnancial crisis, it is
becoming more clear that improvements will need to be made both in
the way that senior executives approach risk management activities
within their organization, and the role of their boards of directors in risk
oversight. Just last month, the Securities and Exchange Commission
(“SEC”) issued a proposed rule that would require public companies
to disclose more information in their proxies about their board’s
risk management role and how compensation practices afect the
company’s overall risk profle. The SEC also indicated that additional
proposed rules would be forthcoming with respect to a company’s
disclosures in its Form 10-K about its risks and risk management
practices. And last spring, Sen. Charles Schumer, D-N.Y., introduced the
Shareholder Bill of Rights Act of 2009 (now in a Senate Committee) that
would require establishing a risk management committee comprised of
independent directors.
While some may fear that the increasing calls for better risk
management may result in additional compliance burdens with little
value added, many companies have found that they can put in place
efective processes for managing risks on an enterprise-wide basis that
will improve strategic decision-making, and support the achievement
of organizational objectives. In order for enterprise risk management
(“ERM”) to be seen as value-adding however, the board and senior
executives of an organization must set the appropriate tone for an open
dialogue about the risks an organization faces, its appetite for those
risks, and its plans for managing those risks.
Having an efective ERM process does not mean you must produce a
multitude of checklists, models, and dashboards. This misperception
that ERM is a very complex process that will involve a tremendous
amount of resources and be a potential source of bureaucracy has been
an impediment to ERM implementation in many organizations. In fact,
an over-reliance on models and quantitative risk measures and reports
has been cited as a contributing factor to the failure of risk management
processes in some organization. And when the credit rating agency,
Standard & Poor’s (“S&P”) began assessing ERM practices within the
companies it rates, its initial focus was on the rated company’s risk
management culture and strategic risk management.

For More Information Contact The Atlanta, Georgia Law Offices Of AttorneyBritt:

AttorneyBritt
Gary L. Britt, CPA, J.D.
1200 Abernathy Road, Suite 1700
Atlanta, Georgia 30328

404-567-6445

“Lawyer's That Mean Business”

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