Enterprise Risk Management

CHAPTER 3ERM and Its Role in Strategic Planning and Strategy Execution

MARK S. BEASLEY, PhD, CPA

Deloitte Professor of Enterprise Risk Management and Director of the ERM Initiative, College of Management, North Carolina State University

MARK L. FRIGO, PhD, CPA, CMA

Director, The Center for Strategy, Execution, and Valuation and Ledger & Quill Alumni Foundation Distinguished Professor of Strategy and Leadership at the DePaul University Kellstadt Graduate School of Business and School of Accountancy

Enterprise risk management (ERM) has rightfully become a top priority for directors and executive management. The current economic crisis highlights the disastrous results when risks associated with strategies are ignored or ineffectively managed. Coming out of the crisis are numerous calls for improvements in overall risk oversight, with a particular emphasis on strategic risk management.

One of the major challenges in ensuring that risk management is adding value is to incorporate ERM in business and strategic planning of organizations. The “silos” that separate risk management functions in organizations also create barriers that separate strategic planning from ERM. In many cases, risk management activities are not linked or integrated with strategic planning, and strategic risks can be overlooked, creating dangerous “blind spots” in strategy execution and risk management that can be catastrophic.

The challenge, as well as opportunity, for organizations is to embed risk thinking ...