The ERM journey
03 October 2013
Risk, uncertainty, and complexity are challenges common to enterprises across many different industries. Milliman has developed universally applicable techniques for analyzing organizational structures and processes that can reveal and mitigate the financial implications of risk factors and can help any organization to become more resilient.
In this short film, Milliman principals and consultants Neil Cantle, Paola Luraschi, Stephen Conwill, Laurens Roodbol, and Joshua Corrigan discuss how Milliman’s breadth of expertise spread across the globe can guide organizations on their enterprise risk management (ERM) journey, from creating an enterprise risk management framework to implementing recommendations, organizing the compliance function, and creating reporting tools.
Stephen Batstone and James Moulder, co-founders of Reunion Asia Pacific, a specialist energy consultancy firm allied with Milliman in the Asia Pacific region, comment on the role of bias and culture, the cost of inefficiencies, the need for better tools, and Milliman’s unique expertise in modeling uncertainty and complex systems.
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Video transcript
Applying ERM across many fields
Getting the best advice
Neil Cantle (Principal, Milliman): Enterprise risk should really be seen as a journey. I think there's a lot to be gained from taking small steps as well as reaching the final goal. You need to think about making progress towards understanding uncertainty better, controlling your business better, and doing all of those things over a period of time.
Paola Luraschi (Principal, Milliman): The key element is to analyze your business, your processes, the way you are trying to reach the goals of your business, and to try to understand what the factors are that can drive you in a different direction.
Stephen Conwill (Principal, Milliman): So the contribution Milliman has made has been to develop techniques that look at the organization and make sure the organization is resilient, so even though an organization cannot quantify risk, they can still be prepared for it and respond to it.
Stephen Batstone (Co-founder Asia Pacific Reunion): It's a really powerful thing to have someone reflect back to you that the behavior of the market or the behavior of a company is not actually what you thought it was. And that goes to show that the role that biases or perceptions in behavior and culture plays on a whole lot of decisions sometimes does need a bit of quantification and assessment.
Laurens Roodbol (Principal, Milliman): So we are not just doing strategic consultancy or general consultancy. We can help you with implementing; we can help you with organizing the compliance function; we can help you with creating reporting tools.
Joshua Corrigan (Principal, Milliman): Risk and understanding risk is really the common language across a number of organizations and across a number of industries, so those concepts and management approaches are readily transferable from one sector to the other.
Applying ERM across many fields
Stephen Conwill: The key point for Milliman is that the techniques that we're developing now are really related to organizational structure and therefore they are transferable from one organization to the next.
Neil Cantle: So one of the interesting things we found moving outside of our traditional sectors is that uncertainty looks pretty much the same wherever it is, and so applying the tools and techniques we've developed in energy or in agriculture or mining, it's exactly the same type of process from our perspective.
Laurens Roodbol: By creating proper performance measurements and risk management, oil companies, the energy sector, these are all markets which we can serve from this perspective, in fact, by doing exactly the same what you're doing for an insurance company. The technical risks are different. But all the economic risks are more or less the same.
Joshua Corrigan: And so being able to understand the dynamics and being able to understand the financial consequences and subsequently being able to mitigate those financial consequences, that is a core part of an organization's risk management program and framework.
Getting the best advice
James Moulder (Co-founder Asia Pacific Reunion): At the end of the day any inefficacy in any system is a cost to somebody whether it be priced inefficiencies whereby consumers pay higher costs or externalities like pollution carbon pollution that aren't taken account of. They are things that make society generally weaker. So if we can develop better tools, put them in the hands of the people that are actually running the assets that provide the services that we need today, and one would argue we'll need a lot more of as time goes on, then we're doing a good job.
Joshua Corrigan: There's now a broad understanding at the most senior levels, at the board and at the executive level, as to the value that a properly formatted enterprise risk framework and process can deliver to the organization.
Stephen Batstone: We see a big difference between Milliman and the other management consulting firms we could work with. There is a breadth of expertise spread across the globe that it seems so easy to tap into that I haven't seen before with other big consulting firms. But also when it comes to uncertainty and complex systems, the guys at Milliman tend to live and breathe this stuff every day.
Neil Cantle: I think it is exciting for a lot of Milliman consultants to see that journey from traditional actuarial consulting all the way through to developing thought leadership in healthcare and pensions and now even beyond into energy and mining and other sectors. A lot of that really comes down to the core skills in understanding uncertainty, developing the very best of tools and techniques in helping clients get to grips with that, and then explaining it in a way that they understand.