Implementation of ERM model- Real case and relationship with the given case

Implementation of ERM model- Real case and relationship with the given case

Organizations face an increasing number of complexities with growing market demands and trends. Consequently, operating an organization involves various risks. In today’s age, risk management has become a vital part of every enterprise that operates globally as well as locally (Arena, Arnaboldi & Azzone, 2010). Hence, the concept of Enterprise Risk Management or ERM evolved over time. Companies operating in the finance, healthcare, or construction industries deal with risks on a daily basis, and an ERM plan can help to mitigate the chances of risks. The ERM approaches of the given case study of Intuit Company shall be compared with that of a Moroccan financial institution.

Outline of the real case

In the Moroccan institution, one of the departments that faced real risks such as credit risks, operational risks, or market risks is the Portfolio Management Department (Benabbou, 2013). The institution also faced strategic issues and was unable to handle its assets. In the beginning, ERM was launched, and the institution took the first steps based on the project goals. They have created a projected team comprising of a risk manager, PMD chief, equities manager, and an internal controller. Usually, ERM can be successfully implemented when internal resources are in sync with the business objectives. Hence, the Moroccan institution at first set the internal objectives. Thereafter, it focused on risk identification and risk treatment. The entire process was monitored and controlled by ensuring effective communication and information exchange.

The assessors focused on the available macroeconomic and financial information, taxation regulations, and key indicators of risks, computer tools, and human resources. They identified vital risks were mostly operational risks. These are inappropriate timing, information overflow, information scarcity, failures of computer systems, and an inadequate BPA or Business Activity Plan.

The results of the risks were payment overdue, interrupted activities, absence of recovery systems, and investment losses. Therefore, the institution focused on treating the risks by facilitating communication, authenticating information, utilization of a single database for centralizing the data, application of well-planned cash flow, usage of portfolio software to manage the risks, and consideration of the BPA policies. Moreover, after identifying the risks, the institution categorized the results into low, medium, and high. Control and treatment of risks were taken seriously. It was concluded that uncertainty increases while enhancing shareholders value. The ERM approach of the Moroccan institution was integrated and helped to manage the catastrophic events occurring in its Portfolio department.

Identifying the similarities and differences with the given case

The ERM approaches of Intuit and the Moroccan institution were very similar because both the firms were operating within the uncertain and complex global environment. The firms could make strategic, operational, and reporting based decisions objectively by implementing ERM objectively and increase its value (McShane, Nair & Rustambekov, 2011). For instance, the purpose of Intuit was to put an end to firefighting, and therefore it acted upon its core principles. The Moroccan institution, like Intuit, also realized the value of creating a framework could be widely applied across the enterprise. Both the companies prioritized risk assessment, risk measurement, and performance monitoring. However, Intuit’s approach towards performance measurement also included KPIs. KPIs helped the firm to identify the indicators and create flexible and tangible results.

In the case of measurement and reporting, Intuit first prioritized the adoption process, and it was followed by risk mitigation and performance management. The Moroccan firm considered the measurement and reporting process as continuous. Hence, instead of using KPIs, the Moroccan firm used KRIs to identify the financial risks. It continuously updated the risk register and the dashboard. It developed the communication process, and Intuit focused on enhancing coordination among team members.

References

Arena, M., Arnaboldi, M., & Azzone, G. (2010). The organizational dynamics of enterprise risk management. Accounting, Organizations and Society, 35(7), 659

Benabbou, L. (2013). Enterprise risk Management: A case study of a Moroccan financial institution. Frontiers in Science and Engineering an International Journal Edited by HassanII Academy of Science and Technology.

McShane, M. K., Nair, A., & Rustambekov, E. (2011). Does enterprise risk management increase firm value?. Journal of Accounting, Auditing & Finance, 26(4), 641-658.675.