Our guest for this episode of PRIMA's Risk Management Podcast is Shannon Gunderman. Shannon is the administrative services director of Yuma County, Arizona where he is responsible for administrating the county’s property, liability, unemployment and workers' compensation programs. He also serves as the county’s enterprise risk management project manager.
Shannon explains that enterprise risk management (ERM) is a completely new way of thinking about risk. ERM approaches risk as the uncertainty that affects the achievement of an entity’s goals, as well as a part of the decision-making process across an organization.
Shannon emphasizes that risk doesn’t appear in silos; it can affect multiple parts of an organization. Therefore, the goal of enterprise risk management is to address and treat risk throughout the organization at all levels. In essence, with ERM, everyone in the organization is a risk manager.
Selling the Benefits of Enterprise Risk Management
Because ERM is a new approach to risk management, the leaders of some organizations may have uncertainty about its value and return on investment. For this reason, it is important to emphasize that an effective enterprise risk management program will improve the decision-making process and enhance communication to improve an organization’s chances of obtaining its goals.
Gunderman emphasizes that by "selling ERM" to the leaders of his organization, he has received 100% support regarding the process, and the question for everyone considering implementing ERM should be how could an entity not afford to spend the time and effort on a process that can make it better.
Common obstacles with implementing ERM
The biggest obstacle to implementing a successful enterprise risk management program is a fundamental lack of understanding of both what it means and what it can accomplish – even risk managers don’t fully understand it. This is why it all comes down to how a risk manager educates, encourages and communicates about ERM.
It is also important to know what is important to your organization's leaders and then explain how ERM can help them achieve that goal, whether it’s an improved budget review process or better inter-departmental communication.
Hire a consultant or DIY?
When faced with the question of whether to hire an ERM consultant or to implement a program using in-house talent, it’s important to weigh the pros and cons of each approach.
Consultants have experience and access to subject matter to ease the process, but they can be pricey and when they the process is complete, they may leave the entity with a static document and not continue to play an active role in the organization.
On the other hand, in-house talent knows the organization and its culture better, but training existing employees can be a time-consuming process. However, working with in-house talent may be more beneficial than hiring a consultant as it allows for an ongoing, active program that helps all employees to better appreciate the organization's objectives.
In closing, Gunderman advises risk managers to acknowledge skepticism about ERM, but to concentrate on the message of what makes ERM great. Even if things don’t always go smoothly, you can learn more from overcoming hurdles, and your organization will benefit in the long run.