Transcript Slide 1

COMMON CHALLENGES AND
SOLUTIONS IN ERM
IMPLEMENTATION TO IMPROVE
MUNICIPAL CLEAN
ADMINISTRATION PROCESS.
M.J. RAMAKGOLO (CCSA)
Contents
1.
2.
3.
4.
5.
6.
What is a Risk
What is Risk Management
What is ERM
ERM in Municipal Context
Challenges and solutions
Conclusion
WHAT IS A RISK
• “A risk is any threat or event that is currently occurring,
or that has a reasonable chance of occurring in the
future, which could undermine the institution’s pursuit of
its goals and objectives.”
• “A risk is the chance of something happening or not
happening that will have negative impact upon the
objectives of the Municipality and/or individual
department. ”
• “The threat that an event or action/inaction will adversely
affect the ability of an organization to achieve its
business objectives and successfully execute its
strategies. ”
WHAT IS RISK
MANAGEMENT
Risk Management is a continuous, proactive and
systematic process, effected by a entity’s executive
authority, accounting officer, management and other
personnel, applied in strategic planning and across the
entity, designed to identify potential events that may affect
the department, and manage risks to be within its risk
tolerance, to provide reasonable assurance regarding the
achievement of entity’s objectives.
WHAT IS ERM
Enterprise Risk Management is a process, effected by the
Board, Executive Management and personnel, applied in
strategy setting and across the operations of 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.
ERM IN MUNICIPAL CONTEXT
• It is about improving the ability to deliver on the IDP
objectives by managing threats, enhancing opportunities
and creating an environment that adds value to ongoing
operational activities.
• All risk and risk management activities should be aligned
to the municipality’s values and principles, strategic and
operational objectives as well as processes and
procedures underpinning the business environment of
the municipality.
• The risk management approach should inform and direct
work to gain confidence on the reliability of control
strategies therefore provide assurance.
CHALLENGES
1. DEFINING RISK
• The issue: One of the biggest challenges is establishing a
consistent and commonly applied risk nomenclature. Any
inconsistencies between risk definitions or methodologies are likely
to jeopardize the program’s success.
• Potential solution: Establishing a formal risk management
framework and common risk nomenclature can be accomplished
through working groups comprised of at least one representative
from each significant business unit and shared service function. The
most critical goal of the group is to establish the definition of risk
itself. While each risk category may be distinct, the definition of risk
must be consistent and supported by clear guidance. The group
must also create a risk inventory and supporting risk taxonomy to
further define and rank all the risks faced by the organization.
CHALLENGES
2. RISK ASSESSMENT METHOD
The issue: Enterprise risk assessments are performed using a variety
of approaches and tools, including surveys, interviews and historical
analysis. Each approach offers its own value and drawbacks that must
be closely reviewed to determine organization suitability.
Potential solution: The risk assessment method employed is largely
based on the number of respondents surveyed, corporate culture and–
perhaps most relevant–organizational familiarity with risk management.
Face-to-face assessments are helpful as they facilitate risk
management education and guidance, encourage discussion and allow
for data collection.
In addition, the risk assessment method is generally tailored to the
audience. For example, many organizations administer executive risk
assessments using a group interview session and apply individual
techniques to management or technical personnel.
CHALLENGES
3. ERM OWNERSHIP
The issue: The question regarding who should “own” ERM is often
unclear and commonly disputed at Council, audit committee and
management levels.
Potential solution: In most programs, risk is primarily owned by line
management with oversight from independent risk, compliance and
management oversight functions. The broader question regarding ERM
program ownership is less decisive and largely based on Council and
audit committee accountability, established risk management function
and infrastructure, and corporate risk philosophy.
While there is no one single industry practice with respect to
organization structure, ERM administration should generally be held by
risk management followed by internal audit, finance/treasury, legal and
various supporting departments (e.g., compliance, strategic planning).
10 common challenges of ERM by Jim Negus
CHALLENGES
4. TIMING OF RISK ASSESSMENTS
The issue: Alignment of all risk assessment programs within the
municipality.
Potential solution: Risk assessments may be aligned to the strategic
planning program of the municipality.
CHALLENGES
5. TECHNOLOGY (use and lack of)
The issue: Municipalities generally do not use technology in their risk
management ,whether for assessments, aggregation, or analytics.
Potential solution: it is generally ideal to join in the world of
technology especially due to its accuracy and use it. However,
practitioners should strive for use of reliable methods in risk
management.
CONCLUSION
It is interesting to review some of the common challenges
risk management professionals are currently facing. It goes
to show that risk management is a very challenging aspect
of business.
As the Sotho saying goes “ Moreku ga a itekole”, we
therefore need to look for avenues to share information,
best practices, and lessons learned.
Ke a leboga
Dankie
Ngiyathokoza
Ke a leboha
Siyabonga
Inkomu
Ndo livhuwa
Enkosi
Ngiyabonga
Ndatenda
Obrigado
Naa Goodee
Asante
Merci
Zikomo
Ta
Thank You