ITS835 Implementing ERM In a Higher Education Environment Discussion Chapter 6 presented the approach the LEGO Group used to implement ERM, and chapter 9 p

ITS835 Implementing ERM In a Higher Education Environment Discussion Chapter 6 presented the approach the LEGO Group used to implement ERM, and chapter 9 presented a discussion and case study on implementing ERM in a higher education environment. Please explain how ERM adoption and implementation in the higher education (HE) environment differs from the for-profit environment. Cite specific examples from this week’s readings.

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A) Create a new thread. As indicated above, explain how ERM adoption and implementation in the higher education (HE) environment differs from the for-profit environment. Cite specific examples from this week’s readings. In your explanation, discuss at least three points or aspects in which the implementing ERM in the two environments differ.

B) Select AT LEAST 3 other students’ threads and post substantive comments on those threads, evaluating the pros and cons of that student’s recommendations. Your comments should extend the conversation started with the thread.

300-350 words ITS 835 ENTERPRISE RISK MANAGEMENT
CHAPTER 9
LESSONS FROM THE ACADEMY: ERM IMPLEMENTATION IN THE UNIVERSITY SETTING
UNIVERSITY OF CUMBERLANDS
1
INTRODUCTION
? Higher education environment
? ERM in higher education
? Adopting ERM in Colleges and Universities
? The University of Washington case study
? Summary
UNIVERSITY OF CUMBERLANDS
2
HIGHER EDUCATION ENVIRONMENT
? Generally considered “different” from enterprises
? Historically separate from targets of legislation
? Often, success may lead to lack of risk management
? Multiple high-visibility scandals have shed light on HE
? Many HEIs have migrated to more corporate ERM
? Different HE cultures demand different ERM solution
UNIVERSITY OF CUMBERLANDS
3
ERM IN HIGHER EDUCATION
? Recognition of institutional areas
? Each encounters unique risks
? Risks can include
? Litigation settlements
? Loss
?
Assets
?
Enrollment
?
Donors
?
Reputation damage
UNIVERSITY OF CUMBERLANDS
4
ADOPTING ERM IN COLLEGES AND UNIVERSITIES
? Think tank of HE to discuss ERM in HE
?
2001
?
Pricewaterhouse Coopers
?
NationalAssocofCollegeandUnivBusOfficers (NAUCUBO)
? Focus
?
Definition of risk
?
Risk drivers in HE
?
Implementation of risk management to assess, manage, monitor risk
?
Proactively engage the campus community
UNIVERSITY OF CUMBERLANDS
5
UNIVERSITY OF WASHINGTON
? Sentinel event
?
$35 million fine for Medicare and Medicaid overbilling
? Push to implement ERM to improve compliance
? UWis built on a decentralized governance model
? Started with
?
Strategic Risk Initiative Review Committee (SRIRC)
?
Each initiative asked
?
Does this proposal add value?
?
What obstacles are apparent and how can they be addressed?
?
How can this proposal be improved?
UNIVERSITY OF CUMBERLANDS
6
? Committee recommendation
?
Create a Culture-Specific ERM
?
Examined other HEIs
UNIVERSITY OF CUMBERLANDS
UNIVERSITY OF
WASHINGTON
(CONT’D)
7
UW
EVOLUTION
OF ERM
UNIVERSITY OF CUMBERLANDS
8
UW ERM
STRUCTURE
UNIVERSITY OF CUMBERLANDS
9
UW’S ERM
INTEGRATED
FRAMEWORK
UNIVERSITY OF CUMBERLANDS
10
UW’S ERM
PROCESS
UNIVERSITY OF CUMBERLANDS
11
UW’S RISK
ASSESSMENT:
LIKELIHOOD
AND IMPACT
UNIVERSITY OF CUMBERLANDS
12
SUMMARY
Outcomes are consistent with guidance offered
by
• National Association of College and University
Attorneys (NACUA)
UNIVERSITY OF CUMBERLANDS
NACUA eight critical factors
•
•
•
•
•
•
•
•
Establish the right vision and realistic plan
Obtain senior leadershipbuy0inanddirection
Align with mission and strategic direction
Attack silos at the outset
Set objectives and performance indicators
Stay focused on results
Communicate vision and key outcomes
Develop a sustainable process versus a one-time
project
13
ITS 835 ENTERPRISE RISK MANAGEMENT
CHAPTER 6
STRATEGIC RISK MANAGEMENT AT THE LEGO GROUP
INTRODUCTION
? LEGO Group history
? Strategy
? Legacy risk management
? Enterprise risk management at LEGO
?
Initial ERM
?
Monte Carlo simulation
?
Active Risk Assessment of Business Projects (AROP)
?
Preparing for Uncertainty
? The PAPA model
? Risk management ROI
2
LEGO GROUP HISTORY
? Headquarters in Billund, Denmark
? Family owned
? Second largest toy manufacturer (globally)
? Founded in 1932
?
Iconic bricks first introduced
?
Bricks manufactured since 1958 fit with one another
? 2400 different brick shapes
? Manufactured in plants across four countries
3
LEGO STRATEGY
? LEGO mission
?
“Inspire and develop the builders of tomorrow”
? LEGO vision
?
“Inventing the future of play”
? Growth strategy
? Innovation strategy
4
ERM AT LEGO
? Risk management developed in 4 stages
?
Step 1: Enterprise risk management
?
Step 2: Monte Carlo simulations
?
Step 3: Active Risk & Opportunity Planning (AROP)
?
Step 4: Preparing for Uncertainty
? Order is by initiation sequence
?
Steps 1 & 2 are damage control
?
Steps 3 & 4 are proactive
5
ERM STEP 1:
ENTERPRISE
RISK
MANAGEMENT
6
ERM STEP 2: MONTE CARLO SIMULATIONS
? Monte Carlo simulation
?
Method of evaluating the effect of input variances on a model of a complex system
?
In short, it helps to see how input variances affect outcomes
? Helps to define risk tolerance
? Implemented in three areas
?
Budget simulation
?
Credit risk portfolio
?
Consolidation of risk exposure
7
ERM STEP 3: AROP
? Active Risk Assessment of Business Projects (AROP)
? Formal approach to defining and handling project risk
? Includes multiple steps
?
Identification
?
Assessment
?
Handling
?
Reassessment
?
Follow-up
?
Reporting
8
ERM STEP 4: PREPARING FOR UNCERTAINITY
? Preparing for Uncertainty
?
Defining and Testing Strategies
? Workshops precede strategic planning sessions
? Four scenarios
?
Agree on two key drivers of uncertainty
?
Describe each of four quadrants of 2×2 matrix
?
Define strategic issues
?
Actions to take
?
“who is doing what by when?”
9
THE PAPA MODEL
? Park, Adapt, Prepare, Act: PAPA
?
Park
?
Adapt
?
Prepare
?
Act
10
RISK MANAGEMENT ROI
? Strong support from upper management
? Efforts have resulted in value
? Many LEGO key planning processes now include risk management
? More visibility of enterprise risk
?
More opportunity to address risk
11
SUMMARY
? Risk management is not risk aversion
? ERM allows LEGO to take risks when appropriate
?
Grow
?
Create value
? LEGO strategic risk management mission
?
“Drive conscious choices”
12

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