A global top 50 consumer products company wanted to increase transparency and communication with its stakeholders. To do this, it began by establishing a risk committee at the board level.
Although the board itself acts as a risk committee, no one on the board had been specifically assigned to this. They then established a risk committee at the executive level and brought in a Chief Risk Officer (CRO). And they identified risk champions at the business level.
To establish better external communication, the company developed a governance structure and increased its overall risk agenda by:
This can occur at different levels. The most basic level is to put additional assumptions around the overall strategic plan, which typically looks three to five years out. The organization listed these additional assumptions, and then asked the three basic questions to develop a risk profile and identify the strategic risks: 1) What has to go right to achieve our strategy? 2) What could go wrong? and 3) How would we know?
The organization asked the same three questions of the business units as they put together their 12-month forecasts to identify the operational risks.
Developing a risk governance structure also included establishing the organization’s risk appetite, defining the risk universe, determining how the business would measure risk and establishing enabling technology to help manage risk.
Asking the three questions at both the strategic and operational levels enabled the organization to document 80 percent of the risks that have an impact on performance. Establishing a risk governance structure, identifying roles and responsibilities, and developing a mandate and scope for each risk committee increased internal stakeholder communication.
By identifying the strategic and operational risks that were impacting the organization’s performance, and by establishing a coordinated approach to risk across the enterprise, this consumer products company was able to communicate its risk strategy confidently and openly with external stakeholders, strengthening relationships and building greater trust in the market.
Case studies in this section were included in Ernst & Young’s report “Turning risk into results.”