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What it Takes to Lead ERM

What it takes to lead ERM

What it Takes to Lead ERM. Talent – the people side of the story. I refer to talent in two ways. First, the employees in your company are referred to as “the talent.” Second, each employee has “talents.” The questions are, do you have the right talent in your organization in order to succeed? And also, do they have the right talents to take your company to the next level?

Enterprise Risk Management ( ERM ) is a unique niche. It’s scary and intimidating for many. It’s easy and makes complete sense for some—like those of us who have experienced it first hand and who also appreciate what it does to a company and for a company. I first took an interest in ERM because of all the natural disasters I have lived through in my life. Those experiences made me be “risk aware” and also taught me to always have a backup plan for everything I did. That behavior became part of who I am, which made me an excellent candidate to become the first Chief Risk Officer of the bank I helped start back in 2005 when the bank was only $250 million in assets.

Community banks and credit unions, and any organization for that matter, need to choose the right person—the right talent, to lead the ERM program efforts successfully. In addition, this person needs to have the right talents to succeed at this role. Some of the talents that this person needs are:

Leadership: Undertaking the effort to create and maintain an ERM program takes, most of all, leadership skills in order to succeed. ERM leaders will need to “gather the troops,” sell the idea that, together—as a whole—is the only way the company will maximize their efforts to protect their company. Good leaders create successful teams.

Communication: ERM leaders need to be the “central station” for this program to work. They need to communicate at all levels and with all constituencies so everyone feels included and “in the loop.”

Empathy: ERM leaders need to understand that when they start asking questions, the other division leaders may feel challenged, questioned, and inadequate to respond to their requests.

Patience: ERM leaders need to be very patient for the entire organization to follow and become risk aware. They will need to educate, educate, educate—everyone. It starts with the Board of Directors by introducing them to the concept, obtaining their approval to start the process, and to make them aware of their liabilities in regards to ERM. Then they need to initiate the training program with the leadership team and then the entire staff. They don’t have to do the training, just coordinate it and bring the experts in.

In addition, ERM leaders need to have experience and skills developed during their careers. For example:

Project Management: They will need to lead a broad, company-wide project. Having experience in leading previous large projects will help tremendously.

Communication skills: I referred above to Communication as a talent, meaning the risk leader needs to include everyone and make employees feel part of the bigger team. Now I’m referring to the skill of communicating well, presenting well, writing professionally (good grammar and spelling), and representing the organization with regulators and all constituencies.

Organizational skills: In order to establish a complete and comprehensive ERM program, the leader has to be very organized. The ERM program is multi-dimensional and thus it’s built with certain foundational components, in various layers, and in a specific order. Otherwise, you will end up with silos—just as you started. For example, Risk Assessments need to be created with the same assessment criteria so the entire company understands what the levels of risks mean.

Board Governance Experience: It is important for the ERM leader to know how the board works so they can present and educate the directors on what they need to learn—what their liabilities are, what they need to approve, accept, adopt, or vote on—during the process. ERM leaders will need to work with the Board of Directors on an ongoing basis as they present updates on the program, incorporate training in their meeting agendas, and introduce the various components of ERM.

Finance Experience: It is useful and helpful for the ERM leader to understand the finances of their organization. Knowing financials will help them identify Key Risk Indicators (KRI’s), Key Performance Indicators (KPI’s) that can also be used as KRI’s, work with the Chief Financial Officer ( CFO ) and Chief Information Officer ( CIO ) on ERM related cost projections. For example, if the institution (or any organization) needs to invest in technology to either upgrade their systems or to improve the safety of customer data (or to provide new products), the Chief Risk Officer (or ERM leader) works with the CIO on the technology aspect, and also with the CFO on the financial aspect. In addition, the Chief Risk Officer works with the President and/or Chief Executive Officer ( CEO ) on the strategic aspect. The point is that they would work together as a team.

My favorite and most rewarding aspect of creating the ERM program for the institution I helped start was the people side. Using the talent I had (the people) and maximizing their talents (their gifts). In the end, the ERM team members learned so much from each other. They learned to appreciate each other more, learned about other unrelated areas to their daily jobs, learned how important it is to be aware of all risks at all times, and most importantly, they learned to work together for the good of the entire company—as one team.

If you are a bank president or director on a board, I encourage you to seek for the right person (talent) as your ERM leader. Choosing the right person is key to the success of your organization’s ERM program. If you are the ERM leader and have what it takes to lead ERM, I encourage you to grow in these areas and seek outside expertise to help you create or strengthen your current ERM program. Take pride in your position at your institution. You are valuable and a key member of the team!

GWC Basics

GWC Basics

GWC ™ Basics: Do You Get It? Do You Want It? Do You Have the Capacity to Do It?

These are three key questions that author Gino Wickman asks business owners in his book Traction to ensure the right people occupy the right positions in your company. I am fascinated with figuring out people’s talents and helping them achieve personal success in life based on discovering their unique talents so this concept intrigued me. The key concept in this book is EOS, which stands for Entrepreneurial Operating System. EOS identifies Six Key Components of any organization. The entire book is very insightful and today I want to share the “People Component” with you.

In the book, Wickman created a practical tool that you can use in your business to ensure you have the “right people in the right seats”—another great concept introduced by Jim Collins in his book, Good to Great. This tool is called the “People Analyzer.” First, you need to know if you have the right people, then you need to put them in the right seats.

According to Wickman, “The right people are the ones who share your company’s core values. They fit and thrive in your culture. They are people you enjoy being around and who make your organization a better place to be.” His formula is: Core Values + People Analyzer = Right People.

In addition to the company’s core values, Wickman introduced another set of parameters to see if your employees are the right people for your company. These “assets” (as he calls them) are:

Get it: Do your employees really get the concept of the specific job and role they’re in? Do they understand the culture, the systems, the company’s pace, and “how the job comes together”? In other words, do your employees “get it”?

Want it: Do your employees truly want the job they’re in? Do they want the new opportunity or promotion you’re offering to them? Are they willing to work the extra hours, for example, to be successful in the position?

Capacity to Do it: Do your employees have the “mental, physical, and emotional capacity to do a job well”? Are they smart enough to do the job (intellectually)? Do they have the time to work more hours (even if they want to, can they?)?

The People Analyzer tool consists of two areas then: 1) List the company’s core values (up to the top five) and rate each employee with a “+” if they exhibit that core value 100% of the time, “+/-“ if they exhibit that core value some of the time, or a “-“ if they don’t exhibit that core value most of the time. 2) Add the three key assets of Get it, Want it, and Capacity to do it (GWC) to the chart as the last three columns. Write the names of each employee in each row and rate them under each core value and asset. The results should be measured against a bar you establish with the minimum number of core values and assets you’re willing to accept as positive (i.e. employees have to match four out of five core values and have a positive score on the three assets of GWC). Employees who match your criteria are considered “the right people” for your company.

The tough decision comes when you, as the business owner or leadership team, end up with one or more team members who need to go because, for one reason or another, they no longer fit in your company. Wickman’s experience shows that most companies experience significant growth after the wrong people are let go of the company. The other team members are grateful and the ones who left ultimately find a better place where they fit and where they can use their talents best.

I encourage you to explore the GWC basics and to, at least, explore asking the questions: Do I have the right people in the right seats in my company? Do my employees Get it? Do they Want it? and Do they have the capacity to do the job? You will get very interesting results. You may also, as an employee, want to ask yourself these questions and see how you respond.

GWC, Six Key Components, People Analyzer, People Component, EOS and the Entrepreneurial Operating System are trademarks or registered trademarks of EOS Worldwide, LLC.

Books by Marcia Malzahn