Will ERM Be Part Of Your Business and Marketing Plan in 2013?-Guest Blog Post by Gary Patterson

ERM Can Be Your Friend. It certainly is something worth considering as part of your overall business and marketing planning process for 2013.

John Paul Getty, industrialist and Fortune magazine’s 1957 world’s richest living American, once said to the effect “Show me the problem and I’ll show you the solution.” ERM is all about taking a step back; assessing risks and making conscious choices as to how your company will respond.

Enterprise Risk Management (ERM) allows you to keep an eye out for strategic vulnerabilities and opportunities. These blind spots run gamut from disasters of all kinds to chances to disrupt the marketplace through new products or services.

An extreme example of a supposedly unanticipated risk is the 2011 Fukushima Daiichi nuclear disaster caused by a Japanese earthquake. The problem should have been foreseen by the designers of the plant and the disaster could then have been avoided through proper engineering. If there had been a proper ERM process in place, the designers could have been “shown” the potential problem.

Information technology (IT) operations are often affected by hurricanes or other severe weather related events. The ERM process looks at both the likelihood and impact of potential scenarios. Using these parameters, your company would assess its response options and might choose to accept the risk for some scenarios; insurance for some events and backup plans for still others. ERM helps you look at your strategic options.

Within your customer base, ERM could highlight the fact that the vast percentage of your business lies with 1-2 customers. Wonder if you were dropped by one or both of these clients? What would be your ERM response to this issue? Sometimes the improbable does happen. Perhaps your firm would adopt a strategy of taking what it has learned in servicing these customers and design a specific set of product and services to go after other large customers or maybe examination of the problem leads the company into developing a new product which disrupts the marketplace increasing sales from smaller customers. ERM can help you uncover opportunities.

Personnel is also an area in which ERM can contribute. How satisfied are your current employees? How strong a retention program do you have for key personnel? What is the marketplace like for recruiting critical people? Your friend ERM can encourage you to look at wage and benefit strategies for recruiting and retaining the right people.

Internal and external compliance is another area of ERM which makes important contributions to the strategic interests of your firm. Does your company have the right internal controls in place, such as separation of duties, to help prevent employee fraud and deceit, an exposure that can literally bankrupt a company? External compliance with regulatory authorities such OSHA and the SEC are also critical company activities. Is this area adequately covered? Are there specific areas that need to be shored up?

Like John Paul Getty suggested, problem identification is more than half the battle. ERM can help with those important blind spots that can trip up or even undo your company. Disaster planning; critical operations like IT; the composition of your customer base; your company’s portfolio of products and services; employee recruiting and retention; as well as internal and external controls are just some of the examples where your friend, ERM, can help you chart your strategic direction.

About Gary W. Patterson

Patterson works with leaders to uncover blind spots to make better business decisions and dramatically accelerate correct fiscal leadership decisions. This helps leaders gain control of their financial destinies and capitalize on hidden high return opportunities, while limiting their exposure to risk.

He authored “Million Dollar Blind Spots”, “Why Risk Management?: Systems for Making Informed Financial Decisions”, “Stick Out Your Balance Sheet and Cough”, “Human Capital RX: The Fiscal Prescription for a Stronger HR Department” and “The Fiscal Fitness System. For more information, visit his website or take his  “free” fiscal fitness test.  He can also be reached at 678-319-4739.

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