Copyright © 2009 PMI RiskSIG

Creating Value through Enterprise Risk Management Val Jonas CEO, Risk Decisions Group Oxford, UK Canberra, Australia +44 1865 718666 Val.jonas@riskdecisons.com Copyright © 2009 PMI RiskSIG

Copyright © 2009 PMI RiskSIG Agenda for ERM Carefully crafted risk framework Process, practice, tools and techniques Maturity, capability, best practice Culture, behaviours, continuous improvement Summary Copyright © 2009 PMI RiskSIG

Carefully crafted Risk Framework Part 1 Carefully crafted Risk Framework

Copyright © 2009 PMI RiskSIG Perspectives on risk Everyone has a different perspective Projects, programmes, supply chain Operations, functions, business units Managers, board of directors Customers, funders, shareholders Copyright © 2009 PMI RiskSIG

Project Risk Perspective COST (Budgets) SCHEDULE (NPV) Deliverables (hard targets) QUALITY (Constraints & Assumptions) Well defined processes for managing projects Budgetary authority Risk “value added” - Fulfill expectations - Customer satisfaction (no unpleasant surprises)

Programme/Operational Risk Perspective COMMUNICATION (Targets, thresholds, escalation / delegation, reporting) FUNCTIONAL ENGAGEMENT (Common themes) Benefits (soft targets) PERFORMANCE (Objectives, Scope & Profitability) Risk “value added” - Winning new business - Functional efficiencies (competitive edge)

Corporate Risk Perspective Shareholder /  stakeholder Value INVESTMENT & FUNDING (Return on Investment, Value for money) MARKET PERCEPTION (Share price, audit report) GOVERNANCE & ASSURANCE (Risk, Controls & Compliance) Organisation – leadership (structure), managing stakholder expectations, resourcing & competencies Performance – Agreeing objectives, setting & measuring targets Governance – Turnbull, SOX, COSO (Treadway), Basel II, audit & financial reporting. Risk “value added” - Enhanced reputation - Improved ratings (increased company value)

Roles and responsibilities Framework defines roles and responsibilities (board level sponsor) Chief Risk Officer responsible for overseeing risk management activity throughout the company Risk Management is everyone’s responsibility Copyright © 2009 PMI RiskSIG

Copyright © 2009 PMI RiskSIG Risk Appetite Amount of risk (and corresponding reward) each project, business unit, division is willing to take Approved at each level up to the board Defined thresholds and triggers Risk Management Reserve (contingency) set and measured against Copyright © 2009 PMI RiskSIG

Process, tools and techniques Part 2 Process, tools and techniques

Risk process Establish context and risk appetite Identify risk events Plan and implement response actions Set and use management reserves Management reporting Same process for corporate, programme, operational and project risks Copyright © 2009 PMI RiskSIG

ERM Guidance OGC, Management of Risk COSO, ERM integrated framework AS/NZ:4360, Risk Management (New ISO 31000 Standard) Copyright © 2009 PMI RiskSIG

Recognise individual needs Multiple processes implemented through configuration: Terminology (labels & visibility) Statuses Response types Categories Copyright © 2009 PMI RiskSIG

Copyright © 2009 PMI RiskSIG Enterprise scoring Automatic recalibration for review and reporting at different levels Copyright © 2009 PMI RiskSIG

Risk Reporting Well defined processes for managing projects Budgetary authority

Maturity, capability, best practice Part 3 Maturity, capability, best practice

Overall Maturity Level Risk Maturity Managed Repeatable Overall Maturity Level Initial Ad Hoc Identify Analyse Treat Culture Context Evaluate Monitor/review Copyright © 2009 PMI RiskSIG

Looking back and ahead Risk Management looks into the future to identify potential threats and opportunities Now Progress Benefits Risks ? Lessons learned Well defined processes for managing projects Budgetary authority Take appropriate action, before it is too late to influence the outcome

Culture, behaviours, continuous improvement Part 4 Culture, behaviours, continuous improvement

Integrated Risk Management Executive Board Information Guidance Programme Functions Operations Projects Support Groups Logistics Prime contractors Contractors / Supply chain Sub-contractors / Supply chain Copyright © 2009 PMI RiskSIG

Copyright © 2009 PMI RiskSIG The Journey Copyright © 2009 PMI RiskSIG

Summary

Where’s the value in Enterprise Risk Management? Project Improved performance Customer satisfaction Program & Operations Winning successful business Functional efficiencies Corporate Funding & investment, market confidence (share price), performance rating (audit) Copyright © 2009 PMI RiskSIG