Enterprise Risk Management

An understanding of the entity’s objectives is essential to the success of your ERM program. Risks are defined as events that can prevent the achievement of objectives and are prioritized in risk assessments based in part on their impact to achieving objectives. The COSO Enterprise Risk Management – Integrated Framework defines Enterprise Risk Management “as a process … to provide reasonable assurance regarding the achievement of entity objectives.”

The terms “goals” and “objectives” are often used interchangeably in practice and in professional literature. Both state desired outcomes an organization is trying to achieve. One is usually used to describe long-term outcomes, the other short-term. The UC ERM Program uses term “Goals” to mean general statements of long-term outcomes in support of the campus/unit mission; goals are broad in scope. “Objectives” are statements of short-term outcomes generally achievable in one year or less. The best objectives are measurable with an achievable end state indicating that the objective has been achieved.

Goals and Objectives for the university may be found in strategic and academic plans. Please see the References below for links to campus/location strategic plans. Campuses and UC locations have established their own goals, objectives and metrics in support of the UC Mission:

“The distinctive mission of the University is to serve society as a center of higher learning, providing long-term societal benefits through transmitting advanced knowledge, discovering new knowledge, and functioning as an active working repository of organized knowledge. That obligation, more specifically, includes undergraduate education, graduate and professional education, research, and other kinds of public service, which are shaped and bounded by the central pervasive mission of discovering and advancing knowledge.”

In support of UC’s research mission, UC Davis, for example, has established a primary goal of:

“Drive Innovation at the Frontiers of Knowledge.”

UC Davis established six subordinate objectives to advance this primary goal, one of which is to:

“Support excellence in basic research and translational science as it applies to solutions of the most critical social problems, including health, poverty, education, energy, transportation and the creation of a sustainable environment”

UC Davis will measure the success of achieving this objective by assessing metrics. Output impact and quality measures include:

The number of faculty inducted into domestic and international academies of high prestige
The number of honorary degrees held or obtained by faculty
The number of invention disclosures, patents, licenses and start-ups that our faculty and staff obtain
The number of faculty awards and other prestigious measures of institutional visibility and leadership and the amount/effectiveness of corresponding media coverage
Increases in the number of undergraduate students who report being engaged in meaningful research partnerships with faculty members
The number of interdisciplinary graduate programs/groups that are recognized as exemplary by external rankings or other measures

Colleges, schools and administrative units within the university develop their own goals and objectives in support of their campus strategic plans. The UC Education Abroad Program, for example, established the following objectives for ensuring the health and safety of students studying abroad:

The Universitywide Office of Education Abroad Programs (UOEAP) is committed to promoting a safe environment for students, faculty, and staff, and to offering reliable information to EAP students and their parents regarding relevant health precautions and potential risks.

Prevent safety, security and health emergencies or respond to incidents as they happen affecting faculty, students and staff
Enable students, faculty and staff in the Education Abroad Program to respond to safety, security or health emergencies using protocols established by UC
Maximize duty of care and minimize UC liability
Ensure that all faculty and staff on contract with UCEAP comply with policies, processes and protocols
Positively involve parents through education and communication

Key performance indicators established to indicate achievement of the objectives include:

Liability claims – number of claims by period declines
Liability claims – number not going to litigation increases
Potential liability from unrealized legal outcomes
Incidents - Decrease in the number of incidents

Defining Objectives Using The Balanced Scorecard
Divisions and units within the campuses and locations will sometimes need to define goals and objectives as a first step in their implementation of ERM. The Balanced Scorecard, developed by Kaplan and Norton at Harvard University, provides an excellent framework for defining goals and objectives and translating them into specific measures. Objectives defined using this framework are “Balanced” in that they are defined from four perspectives:

The Customer Perspective emphasizes satisfying the needs of customers.
The Financial Perspective emphasizes the stakeholder concern about how efficient and effective the unit is at using its resources.
The Internal Business Perspective emphasizes excellence at performing internal processes and in employee competencies.
The Innovation & Learning Perspective emphasizes continuous improvement and the creation of value.

The “Scorecard” measures the achievement of objectives. Begin by making a list for each objective of what is measured currently and what else could be measured. Select those measures that present the most complete indication that the objective is being achieved. Try to limit the number of measures to no more than six per objective and be sure to measure results and desired outcomes, rather than processes. The measures you select will be your “Key Performance Indicators.”

The Customer Perspective measures often include customer service factors important to the customer, such as time to provide service, quality, and customer perceptions on meeting their needs.
The Financial Perspective measures include increases in funding from different sources, reductions of cost and risks, and enhanced use of assets.
The Internal Business Perspective measures include service delivery, core competencies and productivity.
The Innovation & Learning Perspective measures include time to create change, maturity of improvements, growth and competitive success.

Next Steps
Once you know your mission, goals and objectives, you can leverage the ERM Program to increase the chances that you are successful. For example:

Leverage one of our Risk Assessment Tools to look at what risks might interfere with meeting your objectives; These tools are easy to use and support general and specific risk assessments at all levels
Before entering into a contract for a new venture or program, contact OPRS to obtain review that will provide you with a Risk Universe customized to your project. A sample risk universe (xls) including both domestic and foreign risk exposures is available. We recommend that project owners work together with a risk manager to tailor this Risk Universe to the project at hand.
Create a dashboard of metrics - key performance indicators - and other data that can help you track how you are moving toward achieving your objectives.

References:

Campus/Location Strategic Visions and Plans:

The Balanced Scorecard

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