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EVOLUTION OF ERM AT AOL

As we will soon see in detail, AOL has reached a level of maturity sufficient to work with the management of the investee companies to implement its ERM Framework. The evolution of AOL's ERM maturity over time is illustrated in Exhibit 35.3.

Exhibit 35.3 Evolution of AOL's Risk Management

Evolution of AOL's Risk Management

Like many companies, AOL's approach to risk management started in a reactive mode, with a basic ability to respond to negative events. It then progressed to being able to recover as quickly as possible from a potential interruption, and then moved on to a more proactive mode with business continuity planning (BCP) – being able to prepare to ensure the continuity of critical operations and business activities in almost any circumstance. Later on, AOL started to enter the adaptive mode, with a focus of the risk management function on revenue preservation.

Now well into the adaptive stage, AOL is able to use ERM for anticipating risks before they impact employees or assets, protecting revenue generation, gaining competitive advantage, and creating value by adapting to the complex and changing media business environments one finds while investing in foreign countries and cultures. This ability plays an important part in the screening of potential investments by AOL and contributes to AOL's profitable growth strategy through international expansion.

• AOL's investment strategy is to focus on businesses in the media and entertainment sector including platforms, distribution of content, and businesses closely related to AMH's core businesses, including media such as TV, radio, content creation and aggregation, Internet Protocol television (IPTV),[1] and advertising. A major challenge for AOL is implementing ERM across its investment portfolio where it does not have a majority position. Other key challenges in terms of risk management include: Implementing ERM consistently across all investments.

• Managing differences in terms of cultures and obtaining buy-in from management.

• Managing the expectations of board members.

  • [1] Internet Protocol television is a system through which television services are delivered using the Internet Protocol suite over a packet-switched network such as the Internet, instead of being delivered through traditional terrestrial, satellite signal, and cable television formats.
 
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