Integrating ERM With Strategy Do, H., Railwaywalla, M.

Integrating ERM with Strategy Do, H., Railwaywalla, M., & Thayer, J. (2016) examples

Integrating Enterprise Risk Management (ERM) with corporate strategy involves aligning risk identification, assessment, and mitigation processes with organizational goals to enhance decision-making and achieve sustainable success. The three companies examined—Mitchell Industries, Eli Lilly, and Daisy Company—each employ distinct approaches based on their unique structures, cultures, and objectives, reflecting diverse strategies for embedding risk management into their strategic frameworks.

Mitchell Industries adopts an integrated ERM approach primarily rooted in operational practices. After experiencing financial crises, it placed greater emphasis on risk management by elevating a senior member to oversee ERM within the audit committee. The focus is on analyzing risks through interviews and surveys, with an emphasis on critical risks essential to survival. However, the company’s ERM lacks a strategic bridge connecting different business units, which limits the holistic integration of risk considerations across operational and strategic levels. The approach tends to be more reactive, emphasizing compliance and operational risk assessment without a comprehensive strategic alignment.

In contrast, Eli Lilly exemplifies a highly integrated approach, explicitly connecting ERM with ethics and compliance. The company established specialized committees—such as Public Policy and Compliance, and Audit Committee—to oversee strategic risks linked with ethical standards and regulatory adherence. This approach emphasizes the independence of compliance functions, fostering accurate risk identification and accountability at all levels. Lilly’s ERM is embedded within its strategic planning processes, ensuring that risk considerations are integral to decision-making, especially concerning regulatory changes and ethical standards that could impact corporate reputation and strategic objectives.

Daisy Company employs a collaborative, corporate-level ERM framework characterized by an inclusive risk management committee (RMC) comprising top executives and subcommittees focusing on emerging risks like cybersecurity, supply chain, and finance. Risk identification occurs four times annually, utilizing a structured rating system based on velocity, probability, and impact. The company’s approach emphasizes adaptability, with the CEO revising strategic risk mitigation plans annually to align with evolving business conditions. This method reflects a proactive stance by fostering stakeholder involvement, continuous monitoring, and flexibility, which facilitates strategic agility and resilient risk mitigation amid market volatility.

The key differences among these approaches lie in their integration depth, organizational structures, and strategic alignment. Mitchell’s reactive, operational focus contrasts with Lilly’s strategic embedding of ERM within compliance and ethics, fostering proactive risk management aligned with strategic goals. Daisy’s collaborative, adaptive framework embodies proactive risk identification and dynamic strategic adjustments, emphasizing stakeholder involvement and continuous monitoring. These variants highlight that the appropriate approach depends on organizational culture, size, industry context, and risk appetite, with each method serving different strategic and operational needs effectively.

References

• Beasley, M. S. (2016). What is Enterprise Risk Management? Retrieved from [source]
• Do, H., Railwaywalla, M., & Thayer, J. (2016). Integration of ERM with Strategy (p. 35).
• Arena, M., Arnaboldi, M., & Palermo, T. (2017). The dynamics of (dis) integrated risk management: A comparative field study. Accounting, Organizations and Society, 62, 65-81.
• Bromiley, P., McShane, M., Nair, A., & Rustambekov, E. (2015). Enterprise risk management: Review, critique, and research directions. Long Range Planning, 48(4), 265-276.
• Shad, M. K., Lai, F. W., Fatt, C. L., Klemeš, J. J., & Bokhari, A. (2019). Integrating sustainability reporting into enterprise risk management and its relationship with business performance: A conceptual framework. Journal of Cleaner Production, 208, 1423-1434.
• Viscelli, T. R., Hermanson, D. R., & Beasley, M. S. (2017). The integration of ERM and strategy: Implications for corporate governance. Accounting Horizons, 31(2), 69-82.
• Kennedy, P. (2008). Enterprise risk management: Effective ERM practices. Strategy & Leadership, 36(3).
• Beasley, M. S., Clune, R., & Hermanson, D. R. (2005). Enterprise risk management: An empirical analysis of factors associated with the extent of implementation. Journal of Accounting and Public Policy, 24(6), 521–531.
• Lam, J. (2014). Enterprise Risk Management: From Incentives to Controls (2nd ed.). Wiley.
• Nocco, B. W., & Stulz, R. M. (2006). Enterprise risk management and firm performance. Journal of Applied Corporate Finance, 18(4), 8–20.