Elizabeth Carmichael

Elizabeth Carmichael is the director of compliance and risk management for Five Colleges Inc., which includes Amherst, Hampshire, Mount Holyoke, and Smith College. She can be reached at [email protected]

Risk Insider: Elizabeth Carmichael

Putting Your Organizational Values Where Your Risks Are

By: | July 8, 2016 • 3 min read
Elizabeth Carmichael is the director of compliance and risk management for Five Colleges Inc., which includes Amherst, Hampshire, Mount Holyoke, and Smith College. She can be reached at [email protected]

I think that many risk managers (myself included) struggle with guiding their organizations to choose what risks to prioritize for management.

Even when we work for an organization that has a highly functional ERM process, and senior leaders are actively engaged in the identification, management and mitigation of risks, can and/or should compliance and risk officers be leaders in helping them set their priorities?

If the answer to that question is “yes,” how can we be better leaders? We can do it by identifying and aligning risk management as a cornerstone of institutional values.

One of the things that has always bothered me about “reputational risk” is that it measures how the outside world will view the institution (by measuring lost revenue, increased costs, or reduced shareholder value) if it fails to address a particular issue.

This has become a shorthand of sorts for measuring the ethical aspects of failure to address some kinds of risks. The problem is, it doesn’t address the actual values of the organization. Reports have been published on the atmosphere at Penn State where alumni and other donations actually increased in support of the university after the news of the Sandusky sex scandal broke.

Other schools, like Dartmouth University, may have seen a drop in applications from women because of sexual assaults and harassment, but given the strength of the school, it probably hasn’t impacted the bottom line. The outcomes of bad press are impossible to predict.

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There is no discussion, no scoring, in the enterprise risk management process of “How antithetical to our institution and our values would it be if something happened because we failed to address this risk?”

Or, “What are our institutional values and how does this risk conflict with our values?”

We should ask ourselves how risks might be scored if these questions replaced, “What is the reputational risk?”

Assuming — and admittedly it may be a big assumption — that organizations want to align their operations with their stated and implied values, the ERM process can and should be used to support this objective.

Even when we work for an organization that has a highly functional ERM process, and senior leaders are actively engaged in the identification, management and mitigation of risks, can and/or should compliance and risk officers be leaders in helping them set their priorities?

Now, if your company’s sole value and objective is to sell products more cheaply than any other company, ethics and values will not be likely to have any traction with company leadership on risk matters.

But if your company or organization has a mission, vision and/or values statement, you will have a place to start.

Reputation, on its most basic level, is a measure of trust — how well does the organization deliver the products and services, the values, which it promises?

This applies to both the organization’s customers and employees.

Do employees know what the organization’s values are? Are policies, procedures and risk mitigation efforts aligned with its values?

Compliance officers and risk managers may find that, when faced with opposition on a risk mitigation effort or prioritization, that helping mangers understand how the mitigation helps the organization’s actions align with its values will break down the resistance.

I’ve seen it work; try it!

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Risk Insider: Elizabeth Carmichael

ERM Is Not Just ‘Our’ Problem

By: | June 15, 2016 • 2 min read
Elizabeth Carmichael is the director of compliance and risk management for Five Colleges Inc., which includes Amherst, Hampshire, Mount Holyoke, and Smith College. She can be reached at [email protected]

Jack Hampton recently wrote, “Risk managers have a staggering problem on their hands if they are ever going to make enterprise risk management inroads across the full Academy. There is no other way to see it.”

And he’s right. Risk managers will always have a staggering, even insolvable problem, on their hands as long as they are the ones responsible for developing and implementing ERM at their institution. The same holds true for any business.

I’ve recently come back from the Higher Education Compliance Conference of the Society of Corporate Compliance and Ethics (SCCE).

There, I was heartened to hear presentations from multiple institutions where a team of senior leaders across the institution lead the ERM process.

As we know, engaging senior leadership in the ERM process helps to ensure the success of the program by placing the risk ownership across the institution, rather than allowing the perception of ownership to sit in Risk Management.

As we know, engaging senior leadership in the ERM process helps to ensure the success of the program by placing the risk ownership across the institution, rather than allowing the perception of ownership to sit in risk management. The most mature and robust programs fully integrate the compliance, ERM, traditional risk management and internal audit functions.

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The risk management burden, as Jack points out, is endless and ever varying. We will never be able to stop the rogue employee from breaking the rules, including the grumpy professor trying to make a point by publicly illustrating gaps in our systems.

We may seldom be able to stop the determined assassin before he strikes.

However, an ERM program can protect the institution or the company from the consequences of these actions while boosting resiliency and resources if it enables us to develop processes that will

  • Put organizational structures in place to identify and manage risk across the enterprise (including compliance risks);
  • Create codes of conduct, policies and procedures in place to guide people on what to do;
  • Educate and train our community so they know what they are expected to do;
  • Give our operations managers tools to self-monitor their risk management and compliance activities and audit the operations as necessary;
  • Develop a clear reporting and investigation processes for claims and complaints;
  • Discipline those that willfully break the rules; teach those that accidentally break the rules; and
  • Investigate and remediate systemic problems and risks.

So, how do we engage leadership in embracing and leading ERM? We talk about it, frequently and to anyone who will listen.

Practice your one-minute ERM elevator speech and use it on faculty, deans, all of your director-level peers and especially senior leaders.

Meet with key risk partners and share the benefits of an enterprise-wide approach.

Be a thought leader on your campus and tie the ERM process to the academic mission.

Gates Garrity-Rokous, vice president and chief compliance officer at The Ohio State University recommends relentless optimism.

Help your senior leaders and administrators understand that using the ERM process will make their lives easier, because ERM will help the institution allocate resources by highest need. Tell them how the ERM process will make our campuses better through improved awareness and clearer communication of risk issues.

It’s easy to feel discouraged in the face of constant stories of tragedies and malfeasance. But there are silver linings.

The students at UCLA were prepared and knew how to shelter in place so that casualties from the Mainak Sarkar shooting were limited. We’re getting better, we’re doing more with less and finding continual improvement.

Find your inner optimist, share your successes with your peers, keep calm and carry on.

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Risk Insider: Elizabeth Carmichael

Saying ‘No’ to a Risk

By: | March 24, 2016 • 2 min read
Elizabeth Carmichael is the director of compliance and risk management for Five Colleges Inc., which includes Amherst, Hampshire, Mount Holyoke, and Smith College. She can be reached at [email protected]

Being the person who directly says “no” to a risk can be somewhat perilous for a risk manager. As most of us know, the risk manager’s job is more about helping the organization to make an informed decision than being the arbiter of all risk-taking.

It is tempting to support an administrator who has asked for a risk assessment on a proposal that they don’t want to undertake by letting the administrator “blame risk management” for the negative decision, i.e., “Risk Management says we can’t do it.”

All I can say is, don’t do this. Don’t let administrators ever “blame” risk management for a decision unless you actually had the responsibility and authority in your office to make the decision and did so.

This pattern typically exists in organizations where administrators have little or no authority to make decisions, or in organizations where customers (students or parents in higher ed) have easy access to the president or other senior managers who overturn lower managers’ decisions without all the facts at hand.

All I can say is, don’t do this. Don’t let administrators ever “blame” risk management for a decision unless you actually had the responsibility and authority in your office to make the decision and did so.

In performing the risk assessment, be sure to consider the upside of the project, activity or event. Even brainstorm them so that you get a comprehensive list. Then consider the downside, the risks associated with the project, activity or event, and what risk mitigation would be needed for those risks.

Do your best to identify time and money costs to the mitigation efforts. This will give your decision-making administrators the documented ability to say, “We have completed a thorough risk assessment and mitigation analysis on this proposal and collectively determined that the return or reward on the project is insufficient to offset financial or other risks and the administrative costs of mitigating the risks that would be associated with the project. We regret that we cannot undertake this project at this time.”

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Rather than allowing your decision-makers to “blame” risk management, empower them to communicate their educated and well-thought-out decision to stakeholders personally. (They may also surprise you and choose to do it!)

The role of risk management should be to conduct and facilitate risk assessments, and then educate our stakeholders on the outcomes of those assessments. So even if your current administration is comfortable with risk management being seen as the decision-maker, future administrations may not, and you and your department may be seen in a negative light that is difficult to shake, including being labeled as overreaching, lazy (it’s easier to say “no”), and simple nay-sayers, even if that’s not true.

Rather than allowing your decision makers to “blame” risk management, empower them to communicate their educated and well- thought-out decision to stake holders personally. (They may also surprise you and choose to do it!)

Therefore, especially for those of you whose organizations are somewhat dysfunctional, prepare your risk assessment and mitigation plans with the expectation that the president or a future president may be reading it.

Encourage the administrators that you are working with to share the proposal and risk assessment as high up the ladder as possible, and be seen as a positive, helpful force for good management in your organization.

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