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on 22-Apr-10 02:52.
ERM - UnitedHealth Group
Originally Published: July 01, 2005
Enterprise Risk Management (ERM) is a discipline at UnitedHealth Group that identifies risks and alleviates negative exposures while profiting from positive opportunities. The risks can range from financial reporting and compliance to planned business risks.
Some companies are adhering to Sarbanes Oxley Act (SOX) compliance and have not yet embraced ERM. However, SOX does not address some of the important value adding elements for stakeholders-strategic business risk and market/business environmental risks. The goal of ERM is to provide value and not primarily focus on enforcing risk reporting and monitoring.
Executive management can more effectively handle uncertainty in both positive and negative risks with an ERM model and process. The key is focusing on the recognition of risks and mitigating those risks within a suitable tolerance level.
UnitedHealth Group's mission is to improve the healthcare system. After the implementation of Business Risk Management (BRM) into their six diverse operating businesses, UnitedHealth Group believed they were prepared to fully integrate ERM into their business culture.
on 22-Apr-10 02:51.
Insurance Companies' ERM Ratings
Originally Published: July 16, 2007
Standard & Poor's specializes in rating companies on a variety of financial and non-financial measures. Since 2005, Standard & Poor's has evaluated the effectiveness of enterprise risk management (ERM) in European insurance companies. Insurance companies have a strong need for a strong risk management strategy because of the high risk of loss in the industry if something goes awry. Overall, they find that 86% of rated European insurance companies have adequate ERM programs in place.
Elements of an adequate ERM program, as defined by Standard & Poor's, include:
• Fully functioning risk control systems that cover all major risks
• Risk management process is classical, silo-based
• Lacks a clear vision of their overall risk profile
• Risk limits for various risks are set independently, no significant coordination between risk profiles
on 22-Apr-10 02:50.
Integrating SOX and ERM- Truths and Myths
Originally Published: April 01, 2007
Currently, the majority of businesses deal with compliance and ERM management as separate processes. One reason for separation is because organizations were not initially using a risk-based approach to meet compliance issues. Management was more concerned with transparency of financial reports and the appeasement of external auditors. The PCAOB's initial focus on testing and documenting control procedures steered management away from using a risk-based approach. At the end of 2006, the SEC and PCAOB issued proposals that would replace Standard No. 2 which many argued discouraged a risk-based approach for compliance.
Because of the disconnection mentioned above, SOX Section 404 and ERM were treated as separate projects. In order to be more efficient, companies such as Countrywide Financial Corporation and Aquila began merging compliance and ERM management. Countrywide is presently integrating SOX functionality into their internal ERM software. The risk management software allows managers at every level to review risk data for their area to determine if it meets their risk appetite. Executive managers, in turn, use the software to develop a strategic plan for Countrywide's entire risk portfolio. They use a top-down and bottom-up approach to effectively communicate risks at all levels.
on 22-Apr-10 02:49.
Outsourcing Decisions: Taking an ERM Approach
Originally Published: July 01, 2004
Outsourcing of business processes and functions is significantly on the rise. Functions such as information technology (IT) are being outsourced often with the goal of cutting costs and maximizing profitability. In fact, business process outsourcing is expected to grow to $1.2 trillion by 2006, according to some estimates.
Outsourcing of business processes is not only done by large organizations, but the extent of outsourcing by small and medium sized businesses is on the rise. Many argue that the Internet is enabling outsourcing of many business functions that formerly weren't outsourcing candidates.
Analysis of outsourcing announcements by over 300 U.S. companies indicates that all types of business processes have outsourcing potential. Supply chain processes comprised the largest percentage (28%) of outsourcing arrangements followed by insurance claims processing (16%), financial services (16%), and security transaction processing. Within IT functions, hardware/software support comprised 26% of IT functions outsourced, along with network management (18%), and application development and programming (16%).
on 22-Apr-10 02:49.
HOW TO BUILD A BALANCED SCORECARD
by Arthur M. Schneiderman
The balanced scorecard (BSC) has undergone significant change since its widespread popularization in the early 1990s. Although the first balanced scorecard was an integral part of its creators' strategic planning process, its subsequent emulations focused on it as a simple instrument rather than as one element of a total planning system. Consequently, most early adopters just took their myriad of existing non-financial performance measures and force-fitted them to an arbitrary framework that classified scorecard metrics into the prescribed categories of financial, customer, internal, and learning and growth.
I've chronicled elsewhere the resulting common failure modes. Number one on that list was:
"The independent (i.e. non-financial) variables on the scorecard are incorrectly identified as the primary drivers of future stakeholder satisfaction."
Unfortunately this fundamental misapplication of the BSC concept is still all too prevalent.
However, academics, consultants, and practitioners alike have learned much over the last dec
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