Risky Business RIMS Canada Conference 2005

The proper management of enterprise risks – including board members’ active participation in their companies’ risk management structures – will ensure corporate continuity and growth, according to a panel of speakers who spoke at a RIMS Canada plenary session in September entitled “How to juggle with enterprise risks?”

Tom O’Neill, chairman of the Audit Committee of the Board of BCE, told his audience “in addition to robust coverage, strategic planning and board performance are dynamics that are covered by enterprise risk.” However, companies may have trouble achieving such securities without the assistance of a risk manager, because enterprise risks are only observable over a relatively substantial period of time. “Processes vary over time and most people in the company are not adequately trained to recognize this,” O’Neill says.

Moody’s Rating Service interviews and evaluates board performance risk elements in order to assess company credit ratings, thus indicating the importance not only of implementing enterprise risk programs but also of ensuring the project is properly co-ordinated by risk managers, O’Neill added.

He said once a company is on board, its risk management and executive ‘team’ can decide how to best treat risk for a specific situation or for their company’s current situation. Risk can be avoided, transferred through insurance coverage, mitigated or accepted.

Upon reviewing potential risk coverage, company executives often decide the greatest risk potential lies in financial statement risks, but this area often presents the smallest risk, O’Neil said. He said risk potential is completely different for each company and depends upon the company’s immediate situation, market conditions as well as external circumstances.

Risk managers must continually evaluate potential areas of risk and can, according to O’Neill, “identify principal risks of business and develop appropriate system management programs to cover the risk.”

In order for risk management to be useful, board and top executives should participate in the activities of a risk committee, said O’Neill. He said they can add a different perspective that may challenge the program and thus ensure the company has identified serious risks that must be addressed and that less serious risks are assessed for potential losses. “A competent, strong and controlled environment will elicit strong and useful opinions, resulting in policies that can cover a lot of potential risks,” O’Neill says.

For a risk manager who works with a company that caters to more than 7 million customers a year, moves the business each year, and is subsequently exposed to various customs and corporate tax rules, there are a lot of potential risks from which to choose. Robert Blain, senior vice president and chief financial officer of the Cirque du Soleil, says his business practice position includes risk management that is constantly responding to change. “The success achieved by taking risk is integral to the Cirque,” Blain said. “We take many risks… not only financial [risks], but also taking risks to work with new concepts. Bringing new ideas is a necessary risk.”

Blain said the enterprise-level risks he has taken on thus far have been successful for the most part. He said companies properly manage risk by not compromising on quality products, communicating values and missions to their partners and building a strong brand for the marketplace to name a few ideals. In order to properly implement risk management, Blain says there can be “no compromise on values and business principles.”

Successfully managing enterprise risks can add value to shareholders and bring about healthy management and operational strategies, according to Guylaine Saucier, the director of various corporate boards including Petro-Canada and AXA Assurances Inc.

“We are losing perspective right now,” Saucier said. “Board members need to ask themselves if they are meeting and spending enough time on real issues. We need to help the corporation to be competitive and ensure long term survival.”

Saucier explains that enterprise risk management can aid in this area by helping a board implement necessary policies and ethical codes. At the same time, she added, a company must have processes and controls in place to ensure that the risk doesn’t arise or, if it does, that it is properly addressed. She said this is viewed as a huge task for boards because “from a board perspective, they have to deal with multiplicity of different risks and deal with them all at the same time.”

“This is one of the issues,” she added, in which “as a board we must find a way to oversee all risks through the board or committee [and] to at least delegate the risk if not a response. All board members must understand the issue of risks.”