The Chicken or the Egg: A study of Risk Management and Strategic Planning Presented by Raven Henderson Raven Lane, LLC

Raven Henderson, CPA, CIA, CFSA   

Learning Objectives  Understand the relationship between Risk Management and Strategic Planning  Learn tools to apply internal and external risks in a strategic analysis to help build better strategic plans  Examine Enterprise Risk Frameworks, Strength, Weakness, Opportunity, and Treats (SWOT) techniques, and Risk Management concepts

What is Risk?

Identify Risk Events  What could go wrong?  Who could we fail?  Where are we vulnerable?  What resources do we need to protect?  What must go right for us to succeed?  How could our operations be disrupted?  How do we know if we are achieving our objectives?

Identify Risk Events  What information must we rely on?  What decisions require the most judgment?  What activities are the most complex?  What activities are regulated?  What is our greatest legal exposure?  How could someone convert assets?  How successful will be at managing change?  How will we retain critical resources?

What is Risk Management?

The Tools:  ERM  SWOT  Risk Management Concepts

COSO ERM Enterprise risk management is a process, effected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.

COSO ERM

SWOT Matrix Opportunities (External Analysis) Threats (External Analysis) Strengths (Internal Analysis) SO Strategies Capitalize on internal strengths to maximize opportunities. ST Strategies Draw on internal strengths to reduce external threats. Weaknesses (Internal Analysis) WO Strategies Overcome internal weaknesses to maximize opportunities. WT Strategies Reduce internal weaknesses to guard against external threats. SWOT Analysis

Risk Management Checkpoints  Management Policy –Soundness, rationality, and integrity of policy –Clarity and permeability of policy –Understanding of risk management –Basic strategy for risk management –Diversification of risks –Countermeasures for identified risks  Internal Control –Organization, delegation of authority, and reporting –Separation of responsibilities –Staff recruiting and training

Risk Management Checkpoints  Profit and Loss Management –Monitoring –Distribution of resources –Pricing –Competition  Compliance and Disclosure –Management understanding of legal compliance and action to achieve it –Establishment and implementation of a framework –Actively disclose financial information and restraints  Contingency Plan

Words of Caution:  Don’t do these by yourself  Don’t use these for the next 10 years  Don’t expect these to provide all the answers

Questions?