Product Inside the ERM Report

Transcription

1 Product Inside the Report Heat Map Plot of current assessment of all top tier risks Major Critical Impact Range or Moderate Negligible Mino Enterprise Risk Profile Remote Unlikely Possible Likely Almost Likelihood Certain 1a 1a 1a Top Tier Risk Heat Map T-bar = Worst case impact if a risk materializes. y-axis = Most likely impact if a risk materializes. x-axis = Likelihood of a risk materializing, regardless of impact level. Orange = At least Some discomfort Shading arrow = change in impact / likelihood lih rating(s) from previous period green = risk decreasing red = risk increasing Top-level Risk Area Second-level Risk Area Top Tier Risks (by risk area) RMT Assessment = Comfortable with risk at current level. = Some discomfort with risk at current level.!!! = Not comfortable with risk at current level. = Indicates change since previous quarter Early Stage > at CME Group > Seek the Truth ALL RIGHTS RESERVED 16 of 30

2 Product Inside the Report Detail on each top tier risk, highlighting developments over the previous quarter Top-level Risk Area Second-level Risk Area Description of Top Tier Risk Description of any known activities planned or underway with regards to risk Top Tier Risks (by risk area) Summary of Impact Range ( I ) and Likelihood ( L ) ratings from Heat Map Explanation of any change in the impact or likelihood rating from previous period Explanation of any anticipated changes in the impact or likelihood rating over the coming 3-months. Explanation of RMT s Assessment for risk Early Stage > at CME Group > Seek the Truth ALL RIGHTS RESERVED 17 of 30

3 Early Stage Evolution of Toolset What is RISK? Framing RISK > at CME Group Program Design Infrastructure Product > Seek the Truth Is working? Effort and Focus Strategy Alignment ALL RIGHTS RESERVED 18 of 30

4 Is Working? Are You Sure? 1. Focus on Risk Processes or Risk Agility 2. Disregard for RiskDomino Effects 3. Focus on Affirming Data or Negation 4. Driven Check the Box Mentality 5. Crippling Herd Behavior 6. Best Practices and Frameworks 7. Gut versus Measurement Early Stage > at CME Group > Seek the Truth ALL RIGHTS RESERVED 19 of 30

5 Where Does Focus? Early Stage > at CME Group > Seek the Truth ALL RIGHTS RESERVED 20 of 30

6 Value The first step to getting the things you want out of life is this: Decide What You Want! Ben Stein Early Stage > at CME Group > Seek the Truth ALL RIGHTS RESERVED 21 of 30

7 Program Objective Focus On Get the right information to the right people STRATEGIC at the right time so they can make informed decisions. OPERATIONAL FINANCIAL Early Stage > at CME Group > Seek the Truth 22 ALL RIGHTS RESERVED 22 of 30

8 Add Value Align and Strategy Strategy Mandate Key Elements Considered For current Mandate operations and new opportunities: Set odds on key Evaluate viability and uncertainties competitive advantage Opportunity Risk Methods Providing reactive analysis of events and forwardlooking analysis of potential future states VALUE ALIGNMENT Early Stage > at CME Group > Seek the Truth ALL RIGHTS RESERVED 23 of 30

9 Add Value Align and Strategy Common Framework & Strategy Aligned Processes Capabilities Early Stage > at CME Group > Seek the Truth ALL RIGHTS RESERVED 24 of 30

10 Add Value Alignment to Strategy Common Framework Sorting it all out Common Framework Variables Decisions (Controllable) Uncertainties (Uncontrollable) Values Actions controlled by the Factors that cannot be What we want or don t want; decision maker(s) () controlled preferences Understand and Decide Characterize and Evaluate Establish basis for measuring Early Stage > at CME Group > Seek the Truth ALL RIGHTS RESERVED 25 of 30

11 Add Value Alignment to Strategy Common Framework Evaluating Options R d i Reducing Risk At What Cost? Common Framework - $$$ -$ 0 $ $$ $$$ Risk Opportunity What Matters to Strategy and? Enterprise Value (and sub-components of EV) What variables = ƒ ( Controllable ), influence Value? (Decisions) Uncontrollable (Uncertainties) Early Stage > at CME Group > Seek the Truth ALL RIGHTS RESERVED 26 of 30

12 Add Value 1. This is very HARD WORK!!! 2. VALUE is hard to produce harder to DEMONSTRATE!!! 3. Small SUCCESSES are feasible 4. CULTURE is a key success factor!!! 5. PROCESS keys LIQUIDITY, TRANSPARENCY, EFFICIENCY, SAFE FAIR & RELIABLE 6. Always CAPABILITY is way more important than PROCESS Early Stage > at CME Group > Seek the Truth ALL RIGHTS RESERVED 27 of 30

13 As we know, there are known knowns. There are things we know we know. We also know there are known unknowns. That is to say we know there are some things we do not know. But there are also unknown unknowns, the ones we don t know we don t know. Donald Rumsfeld, US Secretary of Defense, 12 February 2002 DOD Briefing Early Stage > at CME Group > Seek the Truth ALL RIGHTS RESERVED 28 of 30

14 Adi Agrawal, Director, Enterprise Risk Management, CME Group Adi leads at CME Group, the world's largest and most diverse derivatives marketplace. Prior to this, he lead the Internal Audit team for CME Group and participated in the early stage build out of the program at CME Group. Before joining CME Group in 2005, Adi held leadership roles in management consulting, operations, technology and internal audit. Throughout his career, Adi has been an active student and practitioner of strategy and risk management disciplines. Adi has completed the Stanford University certificate in Strategic Decisions and Risk Management, has an MBA fromuniversity ofchicago Booth SchoolofBusiness of and an MS in Computer Science from SUNY Institute of Technology. Ahmed Jamil, Manager, Enterprise Risk Management, CME Group Ahmed is Manager of Enterprise Risk Management () at CME Group. Ahmed works with the organization s Risk Management Team, which consists of senior leaders from across the organization, the function fosters a crossfunctional view into enterprise risk. Prior to his current role, Mr. Jamil served in the Internal Audit practice at CME Group for 2.5 years, working with the function on various collaboration initiatives during that time. He was previously with Ernst & Young, working in the Risk Advisory practice in a wide variety of client serving roles. Ahmed earned his Bachelor s in Business Administration from the University of Michigan and his Masters in Business Administration from the University of Chicago Booth School of Business. Early Stage > at CME Group > Seek the Truth ALL RIGHTS RESERVED 29 of 30

15 at CME Group > Seek the Truth Reducing Risk At What Cost? at CME Group > Seek the Truth ALL RIGHTS RESERVED 27 of XX at CME Group > Seek the Truth ALL RIGHTS RESERVED 26 of XX Enterprise Risk Profile at CME Group > Seek the Truth Remote Unlikely Possible Likely Almost Likelihood Certain ALL RIGHTS RESERVED 24 of XX 1a = Indicates change since previous quarter 1a 1a at CME Group > Seek the Truth ALL RIGHTS RESERVED 17 of XX ALL RIGHTS RESERVED 15 of XX Discussion... Add Value Alignment to Strategy Use a Common Framework Evaluating Options Add Value Alignment to Strategy Use a Common Framework Common Sorting it all out Framework Add Value Alignment to Strategy -$$$ -$ 0 $ $$ $$$ Risk Opportunity What Matters to Enterprise Value (and sub-components of EV) Strategy and? Variables Mandate What variables Controllable Decisions Uncontrollable Uncertainties = ƒ ( (Decisions) (Uncertainties) ) influence Value? (Controllable), (Uncontrollable) Key Elements Considered Actions controlled by Factors that cannot be the decision maker(s) controlled Methods Early Stage > Understand Characterize and Decide and Evaluate Early Stage > Early Stage > Product Common Inside the Report Framework Strategy Top Tier Risk Heat Map For current Mandate operations and new opportunities: T-bar = Worst case impact if a risk Set odds on key Evaluate viability and materializes. uncertainties competitive advantage y-axis = Most likely impact if a risk Heat Map Plot of Values materializes. Opportunity current Program x-axis = Likelihood of a risk materializing, What we want or don t Risk regardless of impact level. assessment of all want; Providing preferences Orange = At least Some discomfort top tier reactive risks analysis of events and forward- Shading Establish looking basis analysis of potential future states Aggregate, Risk Management Team arrow = change in impact / likelihood Discern, rating(s) from previous period for measuring green = risk decreasing CME Group Distill red = risk increasing VALUE ALIGNMENT Impact Range Negligible Minor Moderate Major Critical Top-level Risk Area Second-level Risk Area Top Tier Risks (by risk area) Futures exchanges facilitate the People Structure Process management of uncertainty very RMT Assessment = Comfortable with risk at current level. effectively Document and Track Liquidity Transparency Efficiency = Some discomfort with risk at current level. Lets Us Dissect a RISK!!! = Not comfortable with risk at current level. Distribute Board Exec We use Team the same characteristics to better manage uncertainty in our own Safe, Fair & Reliable organization Early Stage > at CME Group > Seek the Truth New / existing uncertainty Early Stage > Accept (Do nothing additional) Transparency Liquidity Learn More (reserve judgment) Causal Factors People What Matters (NPV)? Structure Act (Do something additional) Value Safe, Fair Efficiency RISK & (early Italian riscaire to Processes dare) A CHOICE TO DO (Impact DECISIONS! Range) Reliable 15 Critical How will humans recognize and respond to the probabilities they confront? Moderate Uncertainties Major Event Inflection Point Negligible Early Stage > at CME Group > Beginnings Math & Algebra Seek the Truth 13 ALL RIGHTS RESERVED 13 of XX High Math & Stat. Minor Modern Era 3500 BC to 500 AD 500 to 1600 AD 1600 to 1900 AD 1900 to Present Greeks Arabs Pr(Event) and Hindus High Mathematics High Mathematics Gambling Math or and likelihood Algebra Impact Threshold to Range RISK Event Threshold to RISK Philosphy & Probability Levers or Decisions No Event Early Stage > at CME Group > Seek the Truth 9 ALL RIGHTS RESERVED 9of XX ALL RIGHTS RESERVED 6of XX Early Stage > at CME Group > Seek the Truth