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LESSONS LEARNED

Several lessons were learned in terms of (1) key success factors and (2) the process of selecting and implementing a framework. The findings from these two categories are shown next.

Key Success Factors

Buy-In by Senior Management

Edmonton's Corporate Leadership Team (CLT, comprised of the city manager and the general manager of each department) has supported the concept of ERM. At a senior management level, staff must be able to perceive the value added by ERM. This makes design of an appropriate ERM process, which can show value to management, critical to its success. An example of the value proposition is found in Exhibit 15.13.

In general, the process must have two properties: it must be simple and it must show the value of doing it.

A critical balance must be struck between model power (i.e., how much information it provides) and user-friendliness. A model can provide large amounts of information but will not be helpful if it is too complex to be understood or too time- consuming to be considered worthwhile by the users. Conversely, a model that is too simple will not be helpful, as it will lack the relevance to achieve buy-in.

The pm2 model consists of a number of simple steps performed in sequence to produce powerful results. These results include comparisons of risk, effectiveness of current programs, and the impact of future initiatives on achievement of strategic objectives. The challenge for the ERM team is to show the simplicity of the steps in the model to leaders, to ensure their understanding of the concept and buy-in to the model. Concerns have been voiced by department staff that the model, as followed in the pilot Risk Scorecard workshop, may include steps deemed too complex by branch managers. If necessary, some steps can be removed, and the model stripped to its risk analysis component if other levels of analysis are deemed not to add value to management, without losing the robustness of the model.

Whatever model is used, it must be customizable to the city's circumstances. For example, if branch managers believe a process to be too time-consuming or too difficult, it must be shortened and simplified to overcome this concern. Conversely, if the model is considered too simplistic to add value, rigor must be added to the model to show the value added and to show the time spent to be worthwhile.

Culture of Innovation (Risk-Smart)

In addition to buy-in from senior leadership, ERM also requires a culture of innovation, where new ideas are embraced and failure is tolerated. At a senior

Exhibit 15.12 Sample Proposed Risk Register

Risk

Category

Risk Element

Current

Risk

Rating

Risk

Accepted?

(Y/N)

Summary Comments

Current

Mitigation

Actions

Future Mitigation Actions

Risk

Owner

Status Update

Update

Required

Economic

Economic slowdown results in increased demands on Social Supports

Medium

No

Strategic Outcomes:

Higher demands are placed on existing programs, resulting in reduced overall service levels

Risk Not Acceptable:

Economic slowdown will require the City to prioritize programs and reallocate resources to provide social services in the most effective manner

Devise scalable plan for program prioritization

CLT

Economic

conditions

are

monitored

constantly

no

downturn detected to date

(4 Oct. 13)

6 Months

The ERM Value Proposition

Exhibit 15.13 The ERM Value Proposition

Source: Integrated Risk Management "Building Bridges: City of Winipeg, Audit Department", February 2009.

management level, the Transforming Edmonton Committee (TEC) is responsible for overseeing strategic planning and successful achievement of the city's strategic goals under The Way Ahead. Ensuring that the TEC understands the relationship between strategy, ERM, and performance measurement (PM) is key to successful ERM implementation.

Governments have traditionally been regarded as risk-averse, as political opponents would pounce on any perceived error by the government. To enable a culture of innovation, however, the organization must move from a risk-averse view to a risk-aware view, in which it openly recognizes the risks it faces. Finally, as the organization fully embraces its culture of innovation, it must move from a risk-aware view to a risk-smart view, where risks are embraced, well-managed, and mined for opportunities.

Consistency of Model across the Ways

The ERM Program Manager, as facilitator of the workshops, must ensure that consistent standards are maintained in weighting objectives, defining risks, and determining mitigations and feedback.

A strength of the pm2 model is its robustness. This robustness stems from the model's system of weighting of strategic goals and objectives. Even if a future City Council drastically changed the prioritization of the goals, the model would automatically adjust for this change and update the risk register and other outputs accordingly. Other models would require an in-depth review of each risk in light of such a change.

This weighting system for goals and objectives can potentially be carried over to other management processes as well. For example, the results-based budgeting (RBB) model currently being tested by the City also has a weighting system for city programs to prioritize them. In addition, performance measures can be similarly prioritized to determine which ones carry the highest priority and therefore warrant the most scrutiny.

Another strength of the pm2 model is that it does not differentiate between operating and capital items. Often a strategic objective has both a capital and an operating component (e.g., construction of a new recreation center and staffing and maintaining it afterward), which are dealt with in separate operating and capital budget cycles.

Resource Requirements on Department Subject Matter Experts Each step in the ERM framework requires input at a senior management level in each operating department. Cumulatively these time requirements can be material for senior management already dealing with the resource constraints of their regular deities. The challenge for the ERM and other models is to minimize the time required of city staff to avoid push-back from project fatigue, which would impact the success of the ERM program.

Department Accountability for Key Risks

When key risks are identified, the department in question must take ownership of the model and assign key risks to designated risk owners. These individuals will be responsible for devising and implementing mitigation strategies and reporting results at appropriate intervals.

 
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