Establishing Risk Appetite: for Now and for the Future
Dee McCown, Director of Global Security & Loss Prevention at GraingerClick here for high-resolution version ·Marketwired
Marketwired
CHICAGO, IL--(Marketwired - April 01, 2016) - Enterprise Risk Management is no longer a division unto itself. ERM programs are now aiming to infiltrate every division within the company so that Risk Management is more than an idea, it's a given throughout the entire enterprise that is practiced as innately as breathing. Establishing risk appetite within the business plan is not only important for now, but also for future success.
Dee McCown, Director of Global Security & Loss Prevention at Grainger, recently spoke with marcus evans about topics to be discussed at the upcoming ERM Evolution 2016 Conference:
Before committing substantial resources, what are some of the areas a company needs to consider with risk-laden investment?
DM: Given my area of expertise is in global security and loss prevention I hone in immediately on the potential risks versus the gains when the business initiates a new investment. One of the first things that needs to be asked by leadership, realistically, is what do we expect to gain (profit) with this investment, and do we understand the risks and corresponding costs to be incurred from managing and mitigating the risk. As an example, if a business is planning an acquisition in Brazil, has the leadership team planned and listed each tangible risk and then assigned a corresponding cost? When businesses fail to prepare in this manner they often end up facing trouble later in the project because they encounter issues that were never considered in pre-operational risk planning. Surprises can mean the difference in success or failure in new high risk investments. Avoiding the failure of identifying risks in advance is critical for managing risk-laden investments.
What advice do you have to offer on staying ahead of the competition by commending and encouraging risk?
DM: My answer might be different than most, but I don't recommend most "average" US companies seek foreign investment and undergo undue risk outside the US when they are unprepared to do so. The most successful companies understand that the long game is the game to play if you want your company to survive in a competitive environment. While it is healthy to promote competition, and encourage business leaders to accept new challenges, I have seen too many well intentioned deals completely fail overseas because a US centric business leadership team had no idea of the risk they would encounter, and once on the ground failed in their original goals. I would submit that understanding the company's limitations, and surviving in "manageable" risk environments, is far better than encouraging and seeking risky business ventures that can't be managed by the team in place. Smart business leaders understand their team's limitations and while it is true that a healthy desire for competition is a key ingredient to successful business cultures it is equally true that understanding the limitations of the team and the corresponding risks they face is equally important for businesses that operate in highly competitive markets.
What is the best way to assess the corporate strategy to define risk patterns for specific business lines?
DM: Start with the end in mind. The business needs to figure out what it is good at, and define the mission for every single employee in the organization. Then, determine the resources required to accomplish that mission. Next, determine individual risks by category that pertain to that specific business line and assign a countermeasure to manage each risk category. Finally, assign a cost to each countermeasure and add it up. This methodology, although seemingly simple, provides the leadership team with a comprehensive risk strategy that defines risk, provides a plan on how to mitigate the risk, and provides a general cost for risk countermeasures.
How do you best prepare for the establishment of risk appetite in business for the present and the future?
DM: The best way to establish a risk appetite is to educate the business leaders about the risks they face in the present, with a constant eye on the future. This consists of education and planning. Many business leaders only understand a portion of the risks their businesses face, and are often oblivious to the others. Managing a business is inherently difficult and without understanding the risks and the dynamics of the playing field, chances of long term success are minimal. A good risk manager is constantly "working the problem (current risks)," while anticipating the next curve ball (future risks), and keeping key leaders apprised of both.
What do you think attendees will gain from attending this conference?
DM: I would hope the attendees garner a great deal from hearing their colleagues discuss issues they themselves face on a daily basis. I think that there is real value in having the opportunity to unplug from daily duties and focus on hearing other risk managers discuss how they deal with similar challenges.
Dee McCown joined Grainger in February 2011 as Director, Global Security. His responsibilities include managing a vast array of security matters for the company's international operations in 150 countries around the globe.
Prior to joining Grainger, Mr. McCown was Vice President, Corporate Risk International (CRI) where he managed security projects and provided high risk consulting to multinational corporations and governments around the globe. Before joining CRI, Mr. McCown served twenty-two years in the U.S. Government as an Army Officer assigned to the 75th Ranger Regiment and FBI agent.
Mr. McCown earned his bachelor's degree in Political Science from Texas A & M University in 1987. He speaks and writes often on national security, law enforcement and corporate security topics in the private sector.
Join Dee McCown at the ERM Evolution 2016 Conference, May 10-12, 2016 in Chicago, IL. View the conference agenda to check out Dee's case study topic. For more information, please contact Jen Jordan, Digital Marketing Coordinator, marcus evans at 312.894.6347 or jenj@marcusevansch.com.
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