Keys to ERM – Discipline
There are four keys to ERM – The second is Discipline
Discipline is tightly linked with Transparency, another Key to ERM. Transparency helps to encourage and enforce Discipline.
There are three ways that Discipline is Key to ERM.
Enterprise risk management brings discipline to the mitigation of individual risks, to aggregate risk management and ERM also promotes a disciplined commitment to a comprehensive approach to risk management.
Enterprise risk management brings the discipline to risk management by making explicit plans for managing risk and then following up, checking on the execution of those plans, and reporting the results of those checks. To some, this seems like lots and lots of needless redundancy, but they miss the point. Discipline makes risk management reliable instead of being another wild card in an uncertain world.
ERM encourages insurers to clearly state their approach to risk as well as the amount and types of risks that they will accept. Clear and coherent communication is an often-underappreciated discipline that is much more difficult than it appears. ERM provides a script and outline that makes it easier to speak clearly about risk and risk management.
ERM always starts with a risk identification and prioritization step, so that while all risks are considered, time and resources are used wisely by focusing only on the most significant risks.
Discipline is unlikely to be maintained in secret. Because of Transparency, is is easily and widely known when Discipline falters. Insurers that want to have an effective and Disciplined ERM program will have both Discipline AND Transparency.
This is an excerpt from Discipline is key to ERM on the WTW Wire Blog.