Enterprise Risk Management: Dr. Ronald Menold ✓ Solved

Enterprise Risk Managementits 835dr Ronald Menoldemailprotectedch

Chapter 3 ERM at Mars, Incorporated: ERM for Strategy and Operations

Mars’ ERM history includes a migration to non-family management, underlining its leadership's commitment to risk management. The company viewed Enterprise Risk Management (ERM) as an evolution of existing practices rather than a complete overhaul. This chapter contrasts the COSO framework with a bespoke approach, ultimately concluding that the bespoke method was more suitable for their needs.

Phase 1 of their ERM implementation failed due to impracticality and complexity. However, Phase 2 introduced a simpler, more targeted approach through Planning Workshops. These workshops focused on aligning senior management goals with ERM, employing a simple template that included objectives, scores, and risk columns for risk identification and treatment, with the management team actively defining and ranking risks and their treatments.

The global rollout of Mars' ERM system leveraged the lessons learned from the pilot program, where workshops were instrumental in identifying gaps in risk management readiness and high-risk initiatives. This proactive engagement ensured that ongoing activities could be monitored for unexpected high risks.

The reporting phase of the ERM process brought clarity and urgency through color-coding, which enhanced the understanding of the company's confidence in meeting its goals. The scores generated represented the assurance of achieving set objectives.

In the context of operating workshops, the company underwent several technological changes, transitioning from Word to Excel and eventually to purpose-built software. This evolution facilitated a more complete view of the organizational impact of risk, allowing for continual updates to templates that now included risk treatment owners and due dates.

Mars received recognition for its ERM practices by winning the Corporate Executive Boards’ “Force of Ideas Award” for its effective risk management strategy, attributed to key factors including alignment with corporate objectives, flexibility, and a realistic approach to risk management.

Paper For Above Instructions

Enterprise Risk Management (ERM) is essential for organizations aiming to navigate the complexities of today’s business environment. This paper examines the implementation of ERM at Mars, Incorporated, highlighting the strategies, challenges, and successes that shape their approach to risk management.

Introduction

Risk management has evolved significantly over the past few decades, with organizations increasingly recognizing the importance of comprehensive frameworks to manage potential threats and opportunities. Mars, Incorporated, a global leader in the food industry, showcases an effective ERM strategy that aligns closely with its organizational objectives. The focus of this paper is to utilize insights from Chapter 3 of the ERM case study provided, detailing how Mars integrates ERM into its strategic and operational frameworks.

Mars’ ERM History

The transition from a family-owned business to a more corporate structure initiated Mars' journey into formal risk management processes. Leadership at Mars had a historical commitment to risk management but realized that a more structured approach was necessary as the company expanded its global footprint. The decision-making process differed between following the COSO framework and developing a bespoke approach tailored to their unique operational needs. Mars opted for the bespoke model, which allowed for flexibility and adaptability, essential qualities for a company operating on a global scale.

Initial attempts at ERM implementation faced hurdles, particularly during Phase 1, where the complexity of the proposed system led to its failure. Learning from these setbacks, Mars adopted a simplified approach in Phase 2, incorporating Planning Workshops aimed at aligning ERM with senior management's strategic goals. Through these workshops, the company created a straightforward template that facilitated the identification and ranking of risks and their respective treatments, crucial in establishing a shared understanding and commitment across the management team.

Global Rollout and Lessons Learned

The global rollout of Mars' ERM strategy was informed by lessons gleaned from the pilot workshops held during Phase 2. These workshops not only pinpointed existing gaps in risk management readiness but also identified high-risk initiatives that needed immediate attention. This proactive risk assessment allowed Mars to adapt swiftly to emerging challenges and prioritize resources effectively to mitigate potential risks.

Effective Reporting Mechanisms

One of the standout features of Mars' ERM strategy is its reporting methodology. The implementation of color-coded reporting facilitated a clearer understanding of risk statuses, enhancing transparency and urgency. By visually representing the level of confidence in achieving goals, Mars equipped its leaders with the information necessary for informed decision-making. The scores derived from these reports provided a quantitative measure of readiness that was pivotal in steering strategic actions.

Technological Adaptation and Innovations

Technology played a significant role in the evolution of Mars' ERM processes. Early reliance on basic software tools transitioned into a more sophisticated setup with the advent of purpose-built software tailored for ERM functions. This technology shift not only improved efficiency but also allowed for an aggregated view of risks across the organization, ensuring that leaders had access to comprehensive data to assess organizational risk holistically.

Award-Winning ERM Practices

Recognition of Mars' effective approach to risk management came in the form of the Corporate Executive Boards’ “Force of Ideas Award.” This accolade serves as a testament to the success of their ERM strategies, which hinge on alignment with corporate objectives, adaptability in operations, and a realistic understanding of the risks faced in the industry. The acknowledgment of their ERM efforts highlights the importance of integrating risk management into the broader corporate strategy, demonstrating the potential of a well-structured ERM framework in enhancing overall organizational resilience.

Conclusion

Mars, Incorporated exemplifies how an effective ERM strategy can be embedded into the core of corporate operations. Through continuous refinement of their approach and leveraging technological advancements, Mars has crafted a robust risk management framework that enables it to navigate an increasingly complex global landscape. The company's commitment to aligning risk management with strategic objectives underscores the critical role of ERM in fostering long-term success and sustainability in the face of uncertainty.

References

• Committee of Sponsoring Organizations of the Treadway Commission. (2017). Enterprise Risk Management—Integrating with Strategy and Performance. New Jersey: AICPA.
• Mars, Incorporated. (2021). Annual Report 2020. Retrieved from https://www.mars.com/global/annual-reports
• Frigo, M. L., & Anderson, R. J. (2011). “The Impact of Enterprise Risk Management on Organizational Performance.” Strategic Finance, 93(8), 33-41.
• Beasley, M. S., Branson, B. C., & Hancock, B. V. (2019). “Enterprise Risk Management: Analyzing the Effects of ERM on Organizational Performance.” The CPA Journal.
• Kaplan, R. S., & Mikes, A. (2012). “Strategic Risk Management: A Model for Risk Management in the 21st Century.” Harvard Business Review.
• corporate executive boards. (2020). Award for ERM Innovation. Retrieved from https://www.corporateexecutiveboards.com/awards/erm-innovation
• O’Sullivan, J. & Candelon, F. (2016). “The Role of Technology in Enterprise Risk Management.” Journal of Risk Management in Financial Institutions, 9(4), 365-377.
• Institute of Risk Management. (2018). Risk Management: A Practical Guide to Managing Risks. London: IRM.
• ISO 31000:2018. (2018). Risk Management – Guidelines. International Organization for Standardization.
• Woods, D., & Bodnar, L. (2019). “Integrating Risk Management into Corporate Strategy.” Journal of Corporate Finance.