Enterprise Risk Management, 2nd Edition

CHAPTER 25The Challenges of and Solutions for Implementing Enterprise Risk Management*

 

JOHN R.S. FRASER, FCPA, FCA

Former Chief Risk Officer, Hydro One Networks Inc., Toronto, Canada

 

BETTY J. SIMKINS, PhD

Department Head of Finance, Regents Professor of Finance, and Williams Companies Chair of Business, Spears School of Business at Oklahoma State University

 

1. THE IMPORTANCE OF ENTERPRISE RISK MANAGEMENT

Historically, risk management was viewed very narrowly and handled separately in silos. Under this fragmented view of risk, businesses focused on specific potential events that could be insured against (e.g., property, safety, health). In financial areas, the focus was on interest rate risk, currency risk, or commodity risk (Kloman 2010). In the mid-1990s a number of publications began advocating to businesses that risk management should include all risks, not just specific ones that are easier to quantify, and that risks should be managed as a portfolio across the enterprise. Leading the way were the Australian/New Zealand Risk Management Standard 4360, Tillinghast-Towers Perrin, and the Conference Board of Canada. The Australian/New Zealand Risk Management Standard was first published in 1995 and the Canadian Standards Association (1997) soon followed with its version that added “communication” and “consultation” to the framework (CAN/CSA-Q850-97). The Australian/New Zealand Standard was then reissued (Standards Australia/Standards New Zealand 1999) with updates, including ...