Problem
Introduction and a conclusion (summary) to the paper below. Instructions I followed to write the paper are below. The introduction should: (i) catch the reader's attention. (ii) give the background of the topic. (iii) have a thesis statement. (iv) have a structured overview.
1) What decision-making process has Meyer installed as part of the ERM process?
2) What decisions made by Swissgrid do you agree/disagree with? Explain.
3) What changes could Swissgrid consider in its ERM process as it relates to decision-making?
4) How well does their process compare to the process outlined in Segal's Chapter 6?
Kurt Meyer implemented decision-making processes with his approach to ERM at Swissgrid. Meyer hosted various workshops and encouraged the identification of Swissgrid's risk appetite and risk limits, discussions, and the formation of networking groups. This also included executive workshops as a forum in which "risk officers attempt to identify new risks" with their colleagues. Following these workshops, risk officers can finalize risk assessments and utilize their "Business Unit Risk Map" to consolidate risks. This "Business Unit Risk Map" is a 7x7 impact-objectives matrix formulated by a business unit that oversees the Grid. This matrix was structured to allow employees to assess risk impact from their unique areas of expertise and perspectives. As reiterated by Swissgrid's CEO, Yves Zumwald, the process allows for the mobilization of discussions among individual stakeholders. (Kaplan & Mikes, 2018, p. 7). With that, the risk team can present the executives with consolidated risks and solutions, where executives can approve and update actions. After this approval process, the risks and solutions then go to the board. This multi-level decision-making process allows for risks to be identified at a lower level and processed through the organization to find the best solutions and ultimately implement them from the top down.
Swissgrid begins the decision-making process from the lower level of the organization, by involving employees and their appointed risk officers. I find this approach beneficial in determining what risks exist within the organisation's operational level that may have larger effects. Utilizing this identification process allows for a thorough analysis of what is happening within the organization that can be conveniently tracked to the executives. Once at the executive level, solutions are brainstormed and ultimately approved at the board level. This may be challenging in that at certain levels within an organization, professional and personal priorities could be different, allowing the solutions approved by the board, or risks deemed important enough to make it that far, may not be the most pressing to those at the organizational level. Meyer's decision to engage employers at a grassroots level is wise. Frequently middle and upper managers and C-suite execs are disconnected from their business's day-to-day operations. They typically do not interact with lower-level employees but instead receive perceptions, information, and opinions which have the potential to be filtered and subject to bias. Meyer's decision to fully engage employees from grassroots to grass tops helped to enable a cultural shift in how Swissgrid discussed, identified, and mitigated ERM. For example, Meyer installed a "bottom-up system" that appointed and convened individuals who essentially served as a network of informants. This grassroots approach engaged employees in the field and on-site; on-sites to the actual risks as possible. Another example of a "bottom-up system" he implemented was RiskTalk, a smart app designed to report risk concerns. This was so successful that the use of RiskTalk was also provided to contractors.
Swissgrid may want to consider country risk in their decision-making processes, as there are inherently different risks associated with the nations in which Swissgrid operates. Additionally, having a more in-depth analysis of the identification of risk appetite may help understand how certain decisions are made.
Segal suggests two major categories in the decision-making process: "defining risk appetite and risk limits [and] integrating ERM into decision making" (Segal, 2011, p. 227). In determining risk appetite, Segal's example, "SampleCo" held a "risk consensus meeting" which provided "Enterprise risk exposure- table form, individual risk scenario exposures, mitigation options. Swissgird's approach is similar to Segal's method in using tables and risk scenarios, coupled with mitigation options, as a starting point for risk appetite and analysis. Segal also shares three steps of integrating ERM into decision making: "decision making with ERM, risk-priority decision making, and return-priority decision making," ultimately deciding whether a decision increases company value. Overall, Swissgrid's decision-making process aligned with several approaches Segal identified. They identified risk appetite, risk limits and were especially respectful of the importance of engaging grassroots stakeholders in risk identification and decision-making. Swissgrid's processes included, though were not exclusive of, Segal's recommended fundamentals to integrate ERM into a company's decision-making:
• Timeliness - the need for quick decisions,
• Balance to soft assumptions - the need to back up assumptions with credible data,
• Stock buyback or issuance - adopting a value-based ERM approach helps to make decisions about stock,
• Prioritizing between stakeholders - identifying the impact of focusing on a particular group,
• Mergers and acquisitions - a value-based ERM approach can significantly impact decisions about major business transactions.
Swissgrid is a complex corporation providing a critical service subject to highly dynamic external factors, including weather and climate, EU politics, global politics, and the ever-threatening cyber-attack potential. Their ERM decision-making process resulted in companywide cultural assimilation to the extent that individual contributors owned risk management among business units.
References
• Segal, S. (2011). Corporate value of enterprise risk management: The next step in business management. John Wiley & Sons, Incorporated.
• Kaplan, R. S., & Mikes, A. (2018). Swissgrid: Enterprise Risk Management in a Digital Age. Harvard Business School.