Note: This is the 18th, and final, in a series of blog posts looking at key findings of a Milliman survey on enterprise risk management (ERM) sent to more than 1,000 CFOs, CROs, and ERM directors in the first quarter of 2012. More findings may be found here.
ERM is most frequently linked to risk transfer strategies, capital management, and strategy development. Linkage to performance management, product development, incentive management, and operating plans is lagging, as shown in Figure 18. It is interesting that some respondents indicated that their ERM programs are linked to risk transfer strategies because most operational and strategic risks cannot be mitigated with these strategies. The cost vs. value of ERM programs will appear more favorable once linkage is shown with operating plans, strategic planning, and incentive management.
It is well known that financial services firms use ERM strategies and techniques in conjunction with capital management, new product design, and strategy and financial planning. There is also increased linkage of ERM to operating plans for general corporates. This may signal more acceptance of ERM techniques around risk assessment by the operating companies and business units.