A $100 million US-headquartered, privately held, domestic consumer products organization with several items representing the No. 1 product in their categories, requested John McLaughlin perform a risk assessment for the consumer products company. The risk assessment is intended to help identify important business risks and facilitate a discussion among the Senior Leadership Team of the most important risks and their related risk response strategies. The CEO and members of the Senior Leadership Team became increasingly concerned with the company’s ability to manage a variety of risks, as a result of several compliance issues identified by a US regulatory agency.
Solution & Results
John suggested an offsite retreat with a selected group of 20 individuals from all functions across the enterprise. The purpose of the retreat was to identify risks, as well as events that lead to risks, in a collaborative setting. Then, the selected individuals debated the priority of each risk and the mitigating actions needed to appropriately manage each risk. The consumer products company risk assessment resulted in:
- Refocusing on the most important issues facing the company
- Reduced D&O and General Liability insurance premiums
- Re-alignment of risk response strategies and prioritization of capital allocation
- Improved cadence, compliance, and monitoring of risks and response strategies
Risk Assessment Approach
Prior to the start of the engagement, John conducted an anonymous baseline survey to gauge the attitudes and perceptions of enterprise risk management across the leadership team. The results of the baseline survey were shared at the start of the retreat. The retreat was conducted over a two-day period whereby the CEO articulated the organization’s goals and objectives in the context of ERM at the start of Day One of the retreat.
Facilitated Group Retreat – Day 1
Case studies of recent corporate governance failures were shared with attendees who were also asked to quantify and qualify the concept of “risk appetite” and collectively identify events that lead to risks. Small groups of managers were asked to debate the top risks faced by the organization. Each group subsequently presented their risks to all attendees of the retreat and common themes of risks were identified and combined into a list of the “Top 10” risks. The entire group prioritized each of the combined risks in terms of likelihood/velocity and impact in major categories of high, medium, and lower risk.
Facilitated Group Retreat – Day 2
On Day Two, small groups of managers were asked to debate risk mitigation strategies currently employed by the company and develop new strategies for more effective risk mitigation taking into account time, energy, talent, and capital requirements for each of the Top 10 risks. A primary owner was designated to each of the risks and a few individuals were identified as supporting team members for several risks. An ERM Committee Charter was developed and an ERM Chairperson was elected along with a general timeframe for committee meetings.
Risk Assessment Report
Shortly after the retreat, a post-retreat survey was conducted of all attendees, and John developed a report that captured all elements of the retreat including the baseline survey, discussion points, broad parameters over risk appetite, over 90 events, the top 14 risks and contributing factors, mitigation strategies, ERM Charter and committee composition, and the post-retreat survey.
Benefits of the Risk Assessment for the Consumer Products Company
- FOCUS – the CEO was able to leverage this exercise to focus his team on the most important issues facing the organization.
- COST REDUCTION – Reduced D&O and General Liability insurance premiums. In addition, the Quality Risk team acquired a specialty application / tool that resulted in $800,000 of reduced cost associated with an unexpected and immediate product recall by the vendor of a product’s key ingredient generating an ROI of 80:1 for the tool.
- REALIGNMENT & CAPITAL ALLOCATION – a re-alignment of several risk response strategies that incorporated the collective views of the senior leadership team, and a transparent re-prioritization of capital allocation to address the most pressing risks faced by the organization.
- CADENCE – The ERM program structure established a “play-book” for management to respond to a second, unexpected and unrelated crisis invoked by a Federal regulator within a year of the retreat.
- COMPLIANCE – a report to share with the regulators demonstrating a high level of commitment in management’s response to issues identified.
- MONITORING – improved focus on monitoring activities for selected risks.
Get a Risk Assessment for Your Organization
Contact ERM Exchange at 1.610.304.3856 or info@ermexchange.com to replicate the results of this facilitated group retreat. John has experience working with consumer products companies as well as many other industries to improve their enterprise risk management. His strategies range from less-invasive business risk assessments, such as this case study, to full enterprise risk management solutions. Get started today!