Chapter6presented the approach the LEGO Group used to implement ERM, and chapter9presented a discussion and case study on implementing ERM in a higher education environment. Please explain how ERM ado
Sumit Jangid
Week 5 Discussion
COLLAPSE
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ERM adoption and implementation in higher education are often considered to have a culture that is not self-reflective and would refrain from adopting a system-wide risk management. A significant difference we understand is that the processes, structures, and systems utilized for accountability in business firms (for-profit environments) are not necessarily useful for higher education (HE) environments.
For an organization such as LEGO Group, the implementation of ERM was primarily based on understanding the strategies of the company that were then related to handling strategic risks. Furthermore, the organization also adopted a planning approach that addressed active risks and opportunities before final decision-making for projects. For example, LEGO followed a four-step risk management process. This also included preparing for uncertainty and adapting to a Return-Driven strategy that provided sustainable competitive advantage for the company. As stated by Fraser, Simkins, and Narvaez (2015), “when the LEGO organization implements business projects of a defined minimum size or level of complexity, it’s mandatory that the business case includes an explicit definition and method of handling both risks and opportunities”. Taking such an approach enabled the organization to assess risk tolerance and understand the amount of risk exposure.
While colleges and universities are organizations, it is important to be mindful that they are unique and need to adopt more general business practices. In the case of higher education environments, Enterprise risk management is considered to be an initiative for organizations and corporate processes only, which is not the case. ERM (or risk management and compliance initiatives in general) tend to be viewed as more corporate functions and to align with formal, structural, and bureaucratic aims, goal setting, planning, and decision making (Fraser, Simkins, and Narvaez 2015). This has gradually changed among educational institutions as they have more processes around administration, budget formats and following operational procedures. A significant example is the University of Washington (UW) that adopted the enterprise risk management (ERM) program. The university transitioned from an early compliance program into setting objectives for decision-making based on ERM activities. In the ERM stages, UW focused on creating a risk-aware environment, organizational structure and followed the COSO Model. According to Bowling & Rieger (2005), the COSO model identifies four categories of objectives: strategic, operations, reporting and compliance.
Therefore, among the various differences between ERM adoption and implementation of the higher education (HE) environment as well as the corporate organizations, it is important to align the key objectives with the ERM processes.
References:
Bowling, D. M., & Rieger, L. (2005). Success factors for implementing enterprise risk management: building on the COSO framework for enterprise risk management to reduce overall risk. Bank Accounting & Finance, 18(3), 21-27.
Fraser, S. R. J., Simkins, J. B and Narvaez, K. (2015). Implementing Enterprise Risk Management: Case Studies and Best Practices. John Wiley & Sons.
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Chaitanya Krishna Bapana
Week 5 - Discussion
COLLAPSE
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Authors had discussed the transferability of the ERM model to higher education, even with the cultural and organizational differences that abound between the for-profit environment and higher education. There are several factors which drive to increase and transform Risk management for higher education. This happens when there is increased pressure in productivity, accountability for reducing the costs and their responsiveness. An increased competition in the marketplace and the external scrutiny from government, the public and other rights groups. There are many benefits when ERM is implemented in higher education or for-profit environment where it sustain its competitive advantage and avoid financial surprises, manages all resources effectively and respond to all significant event occurs. There is a view that ERM is only relevant for the for-profit world. But most argue that it is denying reality. ERM helps in in greater risk intelligence and navigate effectively for those risks in order to increase the odds of meeting their objectives. Gurevitz (2009) points out that the early ERM frameworks weren't written with higher education in mind and were often presented "in such a complicated format that it made it difficult to translate the concepts for many universities. For-profit organizations tend to operate from what Bush as well as Bolman and Deal refer to as the formal or structural models and Birnbau, terms bureaucratic. IHEs rushed to form committees to examine ERM and hired risk officers in senior-level positions, following the for-profit model.
Reference
Fraser, J., Simkins, B., & Narvaez, K. (2014). Implementing enterprise risk management: Case studies and best practices. John Wiley & Sons
ERM Initiative Faculty. ERM in Higher Education. Retrieved from https://erm.ncsu.edu/library/article/erm-higher-education
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