ERM at General Motors
Johnny48
ITS 835 Chapters 30, 31, 34
Miscellaneous Case Studies on ERM and RIsk Enterprise Risk Management
Dr. Mike Peterson
Overview
• Three case studies • Alleged Corruption at Chessfield
• Bon Boulangerie
• Building an ERM Program at General Motors
• Different scenarios and organizations • Useful in examining broader implications • Look for similarities
Alleged Corruption at Chessfield
• Chessfield • Fictional private American company in sports and entertainment • HQ in NYC • “Good ol’ boys” board
• Informal governance • Whistle-blower
• CEO compensation very high (4x comparable peers) • Potential environment for excessive risk taking
• Chessfield CEO requested independent governance review
Chessfield, cont’d.
• Review included • Document review – minimal documentation • Interviews – substantial discontent and lack of confidence in
leadership
• CEO compensation • Limited documentation to support decision • Basis seemed to be long relationship with decision makers • Industry standard metrics missing
• Risk management • Few risk management protocols or controls • Most processes were manual (i.e. no IT)
Chessfield, cont’d.
• Review resulted in 45 recommendations • 43 from reviewer
• 2 added by regulator
• All but 2 recommendations were accepted, which were • 3 longest serving board member resign
• A female be selected for directorship and compensation committee
• Identify broad implications of this case
Bon Boulangerie
• Bakery in Oakville, Ontario • When purchased, single site retail and café
• Ray Pane added wholesale operation
• Plan to expand wholesale business • From 20km to 120km coverage
• Include grocery stores
• Add product line
• Goal: triple profits in 3 years
• What are the operational risks?
Building an ERM Program at General Motors
• Background • GM approach to ERM • Game theory • Looking forward
ERM at GM Background
• ERM program began in 2010 • ERM to help achieve competitive advantage
• New CEO
• GM bankruptcy in 2009
• CRO appointed • Financial and Risk Policy Committee formed
• Risk officers identified and aligned to all CEO direct reports
• GM embraced aggressive ERM
GM Approach to ERM
• ERM built on GM’s vision • Design, build, and sell the world’s best vehicles
• Identify and manage key risks • Bottom-up approach • Focus on “what can go right”
• Lessons learned • Gave responsibility of assessing risk probability and impact to senior
executives
• Replaced ranked risk list with tiered list • Implemented a 5 point scale to measure
• Inherent risk • Current risk • Residual risk
Game Theory
Looking Forward
• Top risk attention in place • Ready to add focus on day-to-day operational risks
• Developing program for operational control self- assessment (CSA)
• Approach is a policy-based CSA • Starts with simple yes-no questions to line managers
• Benefits of a policy-based program • Policy can be leveraged to ensure results • Helps to educate teams on larger scope objectives • Ensures that policies are current and effective