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Column

Jack Bergstrand
Founder and CEO, Brand Velocity
Bob Guido, Corporate Director

Turn Enterprise Risk Management Into a Value Driver
Try implementing Value Risk Management. Here are the three steps.

By Jack Bergstrand and Bob Guido

(Note: To attend a complementary webinar on this topic, to be held July 20, 2011 at 1pm EDT, register here.)

Enterprise Risk Management (ERM) is a foundational mechanism for boards and executive teams to assess and govern their corporate risks. Unfortunately, these efforts too often become expensive compliance exercises, with insufficient emphasis on enterprise value creation. Given the pace of change in the global marketplace, many companies could benefit from rethinking ERM through a Value Risk Management (VRM) lens—building upon their ERM investments to systematically improve market and operating performance on a sustainable basis.

Companies can do a better job of protecting their enterprises, monetizing their value chains, and extending their competitive advantages by systematically implementing Value Risk Management. This can be implemented in three steps:

1. Establish a Single Enterprise View

Value Risk Management benefits from an enterprise approach, linked directly to the organization itself. ERM efforts often struggle with this, tending to focus on specific legal, accounting, and IT issues. Value Risk Management can be used to help boards and management design a more holistic approach, to better integrate the company’s strategy, external market, and internal operations.

A single enterprise view for Value Risk Management can easily be designed for most organizations. In practice, doing this can be as simple as creating an enterprise grid, with a standard set of geographies or business units on the Y axis and functions on the X. This unified view can then help boards and executives understand, communicate, and implement Value Risk Management more productively and more successfully.

2. Activate Your Internal and External Expertise

The most important value and risk drivers in most companies are already known by key executives. The problem is that these insights often haven’t been formalized, and are therefore difficult to manage systematically. The best way to incorporate these insights into your Value Risk Management program is to independently interview key company executives, linked to the enterprise framework in designed in step one, about specific customer, competitor, legal, finance, IT, supply chain, and human resource risks and opportunities.

These insights can rapidly and systematically be collected, analyzed, synthesized, and prioritized for action. This step should take full advantage of internal expertise, including the internal audit function, as well as external advisors where outside expertise can improve and accelerate the process.

3. Build an Internal Execution Capability

With Value Risk Management, accelerated project implementation capabilities are essential to convert the potential for value creation into its actual attainment. For VRM to make a large and lasting impact, accelerated project management needs to become a strong internal capability. This internal capability will also help employees grow personally at the same time that the organization improves systematically. By activating the company’s single enterprise view and clear enterprise priorities through an accelerated project management approach, the Value Risk Management will be ready for business.

Realize Your Potential

Value Risk Management is an important improvement to ERM to systematically help companies become more effective, identify and realize their potential in the marketplace, and create better enterprises for a changing future. In our global environment, VRM can help boards and executive teams manage and measure value, risk, and quality more systematically.

Quoting from the book Reinvent Your Enterprise, “In the 21st Century, large companies won’t threaten smaller firms nearly as much as faster firms will threaten slower ones.” In our rapidly changing world, implementing Value Risk Management will do more than increase speed. Done systematically, it will also help companies manage their risks while also generating more value.

Jack Bergstrand is founder and CEO of Brand Velocity, a firm that specializes in large reinvention initiatives. He is author of the book, Reinvent Your Enterprise, the only book of its kind endorsed by The Drucker Institute. Prior to forming Brand Velocity, he was chief information officer of The Coca-Cola Co., chief financial officer of Coca-Cola Beverages, and board member of Coca-Cola Nordic Beverages, a joint venture between Carlsberg and Coca-Cola Co. based out of Denmark.

He holds a master’s degree in human resource development from George Washington University, a master’s degree in management from Stanford University, and a master’s degree in advertising from Michigan State University. He is a frequent contributor to publications such as The Conference Board Review, CIO Magazine, and Directors & Boards.

Bob Guido served as vice chair and head of the then-Assurance and Advisory Practices of Ernst & Young. In other roles he co-chaired E&Y’s Global Client Steering Committee and was also the firm’s senior partner overseeing relationships with the Securities and Exchange Commission, and has served as coordinating partner to some of the firm’s largest, most global clients.

He is on the boards of Commercial Metals Co. and Bally Technologies, chairing the audit committees for both companies. He frequently speaks on corporate governance at various boards of directors’ institutes and forums. He holds a BBA degree from Siena College, an MBA from Case Western Reserve, and is both a CPA and CMA.