In episode 64 of our podcast TrustTalk, we interview Emily Frolick, lead partner of Trusted Imperative by KPMG US, a new, proactive, strategic approach to risk management that creates a powerful platform for growth and innovation. By inspiring trust in customers, investors, employees, suppliers, communities, and regulators, businesses can achieve sustainable advances in performance and efficiency. She talks about the different risks that companies face, including regulation, technology disruption, brand reputation, environmental factors, and cyber risks.
In the area of digital transformation, she notices significant changes to businesses, from moving key functions to the cloud to creating new digital offerings and ways to not overlook the role of trust. She talks about a cultural change project by KPMG US, conducting interviews and workshops with key stakeholders to identify challenges and desired outcomes, leading to a better understanding of the steps needed to create a culture of trust and accountability.
Trusted Imperative – What is it?
Trusted Imperative asks that companies consider the risks they face, including regulation and governance, technology and disruption, brand and reputation, environmental and geopolitical, operational and financial and even crime and cyber risks. I think the approach to trust will remain consistent by looking at the risks you face and the stakeholders that you need to trust you. It’s just the areas of focus and effort are likely to shift as the organization grows.
trust is the ultimate business enabler. Most all risk a company faces have the potential to damage reputation. It comes down to really understanding the likelihood, magnitude and velocity of the potential impact to the business that’s going to drive behaviours and actions. Ultimately, it’s going to be up to each company to decide what are those actions that are going to best serve them in managing and building resilience and what do we have in the way of means to help that?
Digital Transformation
an area near and dear to my heart and many companies are transforming some part of their business or many parts of their business, whether it be moving key functions to a provider or applying a new technology in the cloud, or even creating a new digital offering. And one obstacle I see that companies overlook is taking a look at how can they instil trust from the start of these big initiatives. The focus is often on managing the cost and the timeline of these very sizable and often expensive projects, and while many may focus on a user experience, few are really focused on the risks that we’ve discussed and that complete stakeholder compliment from the start of their project. So often when these risks and stakeholders are addressed as an afterthought or maybe even much later in the timeline, it can create more costly changes or poorly connected add-ons, which minimizes the desired outcome and the potential of the transformation.
Interview with subtitles on the TrustTalk YouTube channel
Transcript of the interview
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In episode 11 of the TrustTalk podcast, we interview two partners of the international accounting and consulting firm EY, Tonny Dekker and Will Weerts on Enterprise Risk. Although Enterprise risk is a fairly broad area, being an expert in this does not mean you know or understand all risks a company could face. Rather both partners consider themselves generalists. Due to their advisory history, they have a lot of knowledge about the way to address risks in an enterprise (being all sorts of organizations, even governments). Risk management is making choices about which risk you are willing to take and building your strategy on that. “Ther is more value money destroyed with poor strategic decisions and poor strategy execution than all the accounting scandals.
In the interview they talk about the risk surrounding KODAK’s failure to maintain their photography technology lead, Apple’s choice to launch the iPad where many believed that would be wrong, and the corporate failures of WorldCom and Nortel at the beginning of the 21st century. The “Six Factors” of risk management are discussed as defined by Loizos Heracleous of Warwick Business School and Katrin Werres, a senior industry analyst at Google as examples of poor risk management strategy, being overly aggressive or showing poor leadership.
They discuss the role of a Chief Risk Officer, the Three Lines of Defence, and the “Catch-22” situation many managers find themselves in. Other subjects that are part of the interview, the challenges of the corona-pandemic risks and IP (Intellectual Property) risks, internal audit function and enterprise risk.
In the interview both EY partners refer to the “Kaplan Model“, named after the Harvard professor who published a risk classification that talks about upside risks, risks and opportunity risks, outside risk, so risk coming from outside the organization which you cannot control, but which you need and want to deal with, and downside risk, so risks that you can manage and monitor yourself.
Listen to the interview on the TrustTalk podcast. The transcript of the interview can be found here:
Further reading on the Kaplan Model: “Managing Risks: A New Framework“, by Robert S. Kaplan and Anette Mikes (Harvard Business Review).
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