Why You Need ERM in Your Strategic Planning

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strategy

Enterprise Risk Management

An enterprise risk management (ERM) process not only informs strategic planning, but also takes into account risks to and from the strategic plan itself. By combining ERM with strategic planning processes, credit unions can create strategies that are not only resilient, but also proactive in nature — as plans and objectives are created with potential obstacles in mind.

Three types of risk in a strategic plan:

How credit unions can use ERM to inform their strategic planning

enterprise risk management

Roles and responsibilities

ERM is a process shared between the Board of Directors and management, so credit unions need a clear distinction between what each group is responsible for. The lack of clear role definitions can lead to cases of miscommunication.

Is a CRO needed?

Many companies now prefer the establishment of a chief risk officer (CRO) over, or in addition to, a risk committee, signifying a formal integration of risk management into the c-suite. Chief risk officers take the lead in carrying out processes that mitigate operational risks — which can include anything from compliance to business continuity, IT security, adapting to market volatility, fraud and auditing. Chief risk officers are sometimes referred to as “change agents” because of the large impact they may have in the direction of a credit union. Perhaps most importantly, it is the duty of the chief risk officer to create a culture of risk awareness at all levels of the organization.

Division of roles

Management

Board

Of course, not all credit unions can justify opening a new c-suite position or find it effective. In many cases, the responsibilities of a chief risk officer are distributed across operational areas along with the compliance department. Risk committees are also becoming more common, and some credit unions are finding that board engagement provides a more holistic approach to risk management.

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