Committee Structure To Administer Its ERM Adopted A Committe

Committee Structure To Administer Its Erm 5uw Adopted A Committee St

COMMITTEE STRUCTURE TO ADMINISTER ITS ERM 5 "UW adopted a committee structure to administer its ERM. Would such a structure work in private industry, or is a Chief Risk Officer required?" The University of Washington (UW) had to implement a robust enterprise risk management (ERM) program after settling a Medicare and Medicaid overbilling investigation. The University had to adopt a committee structure to administer its ERM after paying the largest fine for compliance failure. The new president had to formally charge senior administrators with the task of identifying best practices for managing regulatory affairs at the institutional level by using efficient and effective management techniques (Fraser, 2015).

The objective of the University was to create an excellent compliance model built on best practices while protecting its decentralized, collaborative, and entrepreneurial culture. The ERM process at UW has been a journey of discovery through development and evolvement from the compliance phase to a mega-risk phase (Fraser, 2015). The University is currently focusing on two objectives: strengthening oversight of top risks and enhancing coordination and integration of ERM activities with decision-making processes at the University. The administering of the ERM by the committee structure at UW would differ but be similar in private industry, as every organization adopts an ERM program aligned with its infrastructure.

Every organization’s ERM program may not be directly transferable to another private organization. The University of Washington can use the ERM framework of another organization as a guideline in drafting its own. Critical to effective ERM implementation is the role of the Chief Risk Officer (CRO), who is responsible for assessing and mitigating significant threats, including regulatory, technological, and competitive risks (Fraser, 2015). Organizations rely on CROs to oversee issues related to risk management, including IT security, insurance, financial audits, fraud prevention, and internal investigations. The CRO helps in implementing operational risk management strategies to prevent losses from failed or inadequate procedures, encompassing business continuity and disaster recovery planning (Rouse, 2020).

The responsibilities of CROs vary depending on organizational size and complexity. As technology becomes central to business functions, the CRO’s role in managing data security and privacy risks has expanded significantly (Muse, 2015). Many organizations adopt formal ERM frameworks such as COSO ERM – Integrated Framework or ISO 31000, which provide standardized approaches to risk management, allowing organizations to benefit from consistency and tangible improvements in risk mitigation (Muse, 2015). In industry, the adoption of ERM frameworks is increasing with studies indicating that approximately 37% of nonprofits and 62% of organizations with over $100 million in revenue have formal ERM programs (Muse, 2015). In the private sector, the CRO is pivotal in aligning risk management strategies with organizational objectives, ensuring comprehensive coverage across operational, strategic, and compliance risks.

Overall, while the committee structure utilized by UW for ERM oversight functions effectively at an institutional level, its applicability in private industry depends on the organization’s size, culture, and risk profile. Large, complex private organizations often require a dedicated CRO to lead and coordinate risk management efforts, rather than relying solely on committee-based oversight. The CRO’s presence ensures continuous monitoring, strategic planning, and integration of risk management into decision-making processes, which are essential for navigating volatile market environments and technological advancements (Rouse, 2020). Therefore, although a committee structure can form part of effective ERM governance, highly industrialized or corporately driven entities typically necessitate a dedicated CRO role to enhance agility and accountability in risk oversight.

Paper For Above instruction

Implementing an effective enterprise risk management (ERM) system is crucial for both academic institutions and private organizations in managing their risks and ensuring sustainability. The University of Washington's approach, incorporating a committee structure to oversee ERM, exemplifies an organizational framework aimed at fostering comprehensive risk oversight and strategic decision-making. This paper explores whether such a committee-based structure could be effective in private industry or whether the appointment of a Chief Risk Officer (CRO) is indispensable for managing organizational risks effectively.

UW’s adoption of a committee structure was driven by its need to comply with regulatory standards and to develop a robust compliance and risk mitigation system after a significant settlement related to Medicare and Medicaid overbilling. The university’s objective was to create a model of compliance rooted in best practices, while preserving its decentralized, collaborative, entrepreneurial culture. The ERM process evolved from basic compliance to a comprehensive risk management framework, focusing on strengthening oversight of top risks and integrating risk activities into strategic decision-making. This evolutionary journey highlights the importance of organizational structure in ERM implementation. While UW’s committee approach effectively manages risks within an institutional context, its transferability to private industry warrants examination.

Private organizations often adopt ERM frameworks that align with their infrastructure, size, and strategic priorities. The role of the Chief Risk Officer (CRO) has emerged as a critical element in modern risk management practices across industries. CROs are responsible for identifying, assessing, and mitigating a broad spectrum of risks, from financial to operational and technological threats. Their role extends beyond risk mitigation to include responsibilities like IT security, insurance management, financial auditing, fraud prevention, and internal investigations (Rouse, 2020). The CRO’s centralized position enables a holistic view of organizational risks and facilitates swift response to emerging threats.

Research indicates that organizations with dedicated CROs and formal ERM frameworks tend to have more matured risk management processes. The COSO ERM – Integrated Framework and ISO 31000 are widely adopted standards providing structured approaches to risk governance. These frameworks promote consistency, transparency, and improved risk mitigation strategies. A survey by Muse (2015) revealed that about 37% of nonprofit organizations and 62% of large corporations have established ERM programs, underscoring the perceived value of formalized risk management systems. In essence, the presence of a CRO enhances an organization’s ability to embed risk management within its strategic activities, fostering resilience against unpredictable risks and crises.

The debate between a committee-based approach versus a dedicated CRO role hinges on organizational complexity. While small and medium-sized organizations might effectively utilize committee oversight, larger or more dynamic entities benefit from the strategic leadership provided by a CRO. Such a role consolidates risk responsibilities, ensures continuous risk monitoring, and promotes accountability across the organization (Rouse, 2020). Consequently, industries characterized by rapid technological evolution, such as finance, healthcare, and manufacturing, increasingly prefer appointing CROs to spearhead risk management initiatives.

In conclusion, the efficacy of UW’s committee structure in managing enterprise risks does demonstrate merit in an academic and institutional context. However, in private industry—particularly larger or highly complex organizations—the appointment of a dedicated CRO is generally considered essential. The CRO plays a pivotal role in integrating risk management into strategic planning, operational decision-making, and organizational oversight. Although committee-based governance can serve as a supplementary mechanism, the strategic leadership and operational focus of a CRO provide a more effective and agile approach to enterprise risk management in the private sector.

References

• Fraser, B. J. (2015). Implementing Enterprise Risk Management. Case Studies and Best Practices. Kolb Series in Finance.
• Muse. (2015). Adopting a new enterprise risk management program. Retrieved from https://muse.com
• Rouse, M. (2020). Chief risk officer (CRO). Retrieved from https://searchcio.techtarget.com/definition/chief-risk-officer
• COSO. (2004). Enterprise Risk Management—Integrated Framework. Committee of Sponsoring Organizations of the Treadway Commission.
• ISO. (2018). ISO 31000:2018 Risk Management – Guidelines. International Organization for Standardization.
• Beasley, M. S., Clune, R., & Hermanson, D. R. (2010). Enterprise risk management: An empirical analysis. The Accounting Review, 85(3), 767-786.
• Lam, J. (2014). Enterprise Risk Management: From Incentives to Controls. Wiley Finance.
• Power, M. (2007). Organized Uncertainty: Designing a World of Risk Management. Oxford University Press.
• Fraser, B., & Simkins, B. (2010). Enterprise Risk Management: Today's Leading Research and Best Practices for Tomorrow's Executives. John Wiley & Sons.
• Archer, S., & Mikes, A. (2017). Risk Management in Financial Institutions. John Wiley & Sons.