The Better the Brakes, the Faster the Car – adding value through improved ERM

– adding value through improved ERM

by François Masquelier, Head of Corporate Finance and Treasury, RTL Group, and Honorary Chairman EACT

European companies have been using Enterprise Risk Management (ERM) to varying degrees as part of an ongoing effort to raise awareness and promote appropriate risk management responses and deliver value for stakeholders. More recently rating agencies have added to the clamour for increased transparency of risk management, providing senior management with an increased incentive to revise and improve ERM processes.

ERM is an initiative that, by definition, is never complete

Some European companies, including RTL Group (RTLG), have decided to embrace Standard & Poor’s (S&P) initiative to assess ERM processes of non-financial companies as being an opportunity to revise and improve their existing practice.

In November 2007, S&P consulted users of their rating services in order to validate their approach to benchmarking ERM processes across non-financial institutions. S&P have subsequently developed their ERM assessment – the outcome of which is a rating of a company’s ERM competency as being either ‘weak’, ‘adequate’, ‘strong’, or ‘excellent’. It appears the S&P assessment will concentrate on the culture of risk management and governance concentrating on specific examples to demonstrate how this works on a day-to-day basis. The adoption of a recognised unifying standard such as COSO ERM Framework or the Australian and New Zealand Standard on risk management (AS/NZS4360/2004) is helpful but is not a pre-requisite nor sufficient proof of having adopted good practices1.

RTLG has used the pending S&P assessment to review existing practice in order to be able then to revise internal control processes to make them more effective and efficient. This step was taken as part of a continuous process of improvement initiative.

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