AFERM Newsletter, Issue 29, June 2019
This is the 29th issue of the quarterly AFERM Newsletter! It includes thought leadership articles from ERM practitioners with Galvanize, KPMG LLP and Morgan Franklin Consulting. Also, AFERM Summit 2019 registration is open with early bird pricing for a limited time.
ERM as an innovation enabler
By Tom Brandt
At a recent conference, I was stopped by an agency leader who told me they are not supportive of enterprise risk management (ERM) because they need their managers and employees to focus on innovation and to embrace change. In their view, they felt that ERM would only make government more risk adverse than it already is. In the five minutes we had to chat, I spoke about upside risk and downside risk, attempting to emphasize that risks, in and of themselves, are neither good nor bad, and that ERM is not just about preventing bad things from happening. It’s also about enabling good things to occur. I wasn’t sure as we parted ways, that I’d made a convincing argument.
Since that exchange, I’ve noticed comments in news articles and other media that have suggested similar views toward ERM. Based on my experience, government, on the whole, does tend to be more risk-adverse, in part, because it is reflected in the mission of many agencies – they exist to prevent bad things from happening to the American public. However, it’s also the mission of many agencies to promote innovation, to foster research and development, and to take risk.
Regardless of whether an agency mission is more focused on risk-prevention than risk acceptance, a common denominator we face across government is that when something goes wrong, the level of attention and scrutiny that results typically far outweighs what is experienced in other sectors. The spotlight tends to shine brighter and the desire to assign blame usually runs far ahead of figuring out what actually happened.
It should be no wonder then, that those working in this environment are more attuned to risk and generally act in a more cautious way. This is probably not a bad thing, considering the scale of the decisions we make in government, where the actions we take have widespread impact, not only across the U.S., but often throughout the world. In these instances, I want the decision-makers to have fully considered and weighed the risks before choosing a course of action.
Like any organization, innovation is essential in government. Yet, innovation, by its very nature, involves risk. We may know the outcome we desire by undertaking an action, but whether we will end up achieving that outcome is uncertain. ERM, when practiced well, can help increase the likelihood that action will be successful in achieving the desired outcome by providing us with insight not only into what could go wrong, but also with an understanding of what must go right. That insight equips us with the ability to monitor and track innovation efforts to ensure they are staying on course, while also giving warning signals when they are not, allowing the opportunity for course corrections before risks manifest.
AFERM, through the workshops, seminars, training, and thought leadership it offers, strives to emphasize that ERM is not about achieving zero risk. Rather, the objective is to have a proactive, collaborative program in place that properly identifies and assesses risks and provides leadership and management the information needed to make sound decisions, with risk being one of the core elements of the decision-making framework.
So, in my view, ERM is an innovation-enabler! Let me know your thoughts and reactions.
Tom Brandt, AFERM President, may be contacted at firstname.lastname@example.org.