Implementing Enterprise Risk Management: Case Studies and Best Practices

CHAPTER 7 Turning the Organizational Pyramid Upside Down Ten Years of Evolution in Enterprise Risk Management at United Grain Growers

JOHN BUGALLA

Managing Principal, ermINSIGHTS

Strategy without tactics is the path to uncertain success; tactics without strategy is the noise before defeat.

—Sun Tzu (c. 544–496 B.C.)

Few companies stand out as successful pioneers in enterprise risk management (ERM), especially one that undertook the initiative almost 15 years ago. One such ERM pioneer was United Grain Growers (UGG), a conservative 100-year-old Winnipeg, Canada–based grain handler and distributor of farm supplies. When UGG announced that it had implemented a new integrated risk-financing program in 1999, it received a great deal of attention in the financial press. CFO magazine hailed the UGG program as “the deal of the decade.”¹ The Economist characterized it as a “revolutionary advance in corporate finance.”² Harvard created a UGG case study.³ While most outside attention focused on the direct financial benefits of implementing the program (protection of cash flow, the reduced risk capital required, and a 20 percent increase in stock price)⁴, scant attention was given to the less tangible and therefore less measurable issues of governance, leadership, and corporate culture—the conditions that enabled such innovation. It was a combination of a collaborative leadership open to new ideas, a culture of controlled risk taking, and active risk oversight by the board that produced ...