The yellow brick road led to the Emerald City. The enterprise risk management (ERM) Emerald City is the risk management maturity we are all looking for, but most of us do not know where it is exactly and even what it looks like. We do, however, have an idea. In a number of five step maturity models, the 5th and final stage is often called “Optimised”. What does this look like?
This is the nirvana of ERM where risk management is fully embedded into day to day management. Sophisticated and advanced risk management processes are used for all major risk types. Risk management is used as a key value driver supporting decision making and supporting the pursuit of opportunity. Risk, including emerging risks, are proactively identified and monitored through key risk indicators and predictive risk analytics and everyone lives happily ever after! (Read our post about critical ingredients to successfully maturing your ERM).
In the second book “The marvellous land of Oz”, it was revealed that there were, in fact, two yellow brick roads to the emerald city from Munchkin Country and Dorothy had in fact, followed the one that was longer and more dangerous. The same is true for the roads to ERM maturity except there are many more than two roads!
If you are already on the ERM journey or are planning to start, there are FOUR things to carefully consider:
What is the benefit of going on the journey? What is the value proposition of maturing your ERM? The clearer and more value focussed is the end goal, the easier and more effective will be the journey to it.
What does the end goal look like and what are the checkpoints you should aim for on the journey? You need a blueprint of the destination so that each step is a step in the right direction.
Where are you right now? A journey needs to be based on current location. This requires you to measure yourself against a good ERM maturity model and find exactly how your current capability measures up.
How are you going to get from where you are now to the end goal? Which of the many roads are you going to follow? As with Dorothy, you risk following the longer and more dangerous route. You need to plan your route well, obtain a good map from a trusted and respected guide and perhaps appoint a Sherpa or two to help you along.
Protecht is a guide in ERM. We can use our expertise and knowledge to help guide you on the best path and also motivate you to move forward by showing you what the value of reaching the Emerald City.
We also have a few tools to help lighten your load.
Author of 'A Short Guide to Operational Risk', David Tattam is an internationally recognised specialist in all facets of risk management, particularly at the enterprise level. His career includes many years working with PwC, as well as two Australian banks. His achievements include the creation of the Middle Office (Risk Management Department) for The Industrial Bank of Japan in Australia and the complete implementation of all Australian operations, systems, procedures and controls for Westdeutsche Landesbank (WestLB).