Basics Of ERM and BPMM
- 1. Basics Of ERM & BPMM
- 2. Contents Brief on presentation contents Introduction 1 Risk Management meaning and importance Risk Management 2 ERM Meaning and how it helps an organization ERM 3 BPMM Meaning and how it helps an organization BPMM 4 Levels of BPM and characteristics of Processes at different levels of business maturity Levels of BPM 5 Correlation between BPM and ERM Process Maturity & ERM6 Fueling growth through ERM and BPM Support for Growth 7
- 3. Introduction ■ Risk management, Enterprise Risk Management and Business Process Maturity Models are in itself huge topics. ■ This presentation aims to cover basic meaning of these topics and highlight and how these can prove to be value adding exercises and support function for organizational growth. ■ It is expected that the reader of the presentation has some basic knowledge in the domain of ERM, Risk Based Internal Audits (RBIA).
- 4. Risk Management ■ Risk management is a relatively new concept in India ■ Current Indian corporate governance regulations require corporates to have a robust risk management framework for protection of stakeholders interests ■ TO put it in simple terms, risk management refers to – continuous monitoring of risks – implementing risk mitigation measures, – proactively foreseeing both internal and external risks – and accordingly responding to minimize risk impact ■ It would be considered prudent for corporates to have risk management incorporated in corporate growth strategy
- 5. Enterprise Risk Management ■ ERM is about identifying and evaluating risks and preparing appropriate responses to any potential events that may have an adverse impact on a organization ■ ERM framework vary in complexity and structure. ■ COSO and ISO 31000 are examples of ERM frameworks
- 6. Business Process Maturity Model (BPMM)? ■ BPMM is a evolutionary path for an organization from immature, inconsistent business processes to mature disciplined processes ■ Progressive stages of improvement are defined. As the organization progresses towards Business Process Maturity, the foundation is based on earlier achieved improvements. ■ Basically, it provides practical roadmap which can be measured for progress and monitored easily and effectively.
- 7. Organizations Level Of Process Maturity Initial •Por definition of processes •Lack of or poorly designed internal control system •Reactive decisions •Individual planning, motivation and heroics Repeatable / Managed •Unit process discipline in place •Processes are repeated •Rework is reduced Defined •Processes are well defined and documented Quantitatively Managed •Processes are measured and controlled Optimizing Success depends upon individual employee efforts Success depends upon Management competencies Success depends upon BPM Competencies BPM success achieved through the stages to be followed across the organization consistently Focus on continuous improvement
- 8. Level Of Process Maturity & Risk Management ■ Level of risk management maturity in a organization is directly proportional to level of process maturity ■ Higher the level of process maturity higher the level of risk maturity ■ Risk aware process owners throughout business functions are better equipped to mitigate risks and act proactively to challenges of business environment
- 9. Fueling Organizational Growth Through ERM and BPM ■ Risk management through BPM brings in operational efficiencies ■ Human Resources become available for more intellectual jobs rather than getting stuck with their routine work ■ Enhances employee morale through better job satisfaction. ■ Motivated employees directly translates to better efficiencies ■ Let us understand this with the help of an example of purchase requisition process in the following two slides
- 10. Risk Management Through BPM Fueling Business Growth Extract of an example involving purchase requisition process Process Maturity Level Process Risk Risk Mitigation Measures Through Different Maturity Levels Risk Classification Process In-Efficiency Business Process Improvement Implemented To address inefficiency Efficiency achieved through different levels of maturity after Business Process Improvement Implementation Initial Purchase requisition not raised by user department ▪ Excess / short material purchase ▪ Delay in procurement ▪ Factory may not need the material arrived at factory gate due to change in production schedule Purchase team manually tracks stock levels, lead time, seasonal fluctuations in consumption, price fluctuation, production schedules and places purchase orders. Operational Time and motion studies revealed that most of time of purchase team is consumed only in routine procurement activity with little time to strategize for bringing in procurement function efficiency and cost savings Stock management system implemented to track daily consumption and stock level reporting to purchase team. Not Applicable Repeatable / Managed Purchase requisition not raised user department. Consumption pattern and stock levels available to procurement team through stock management system ▪ Delay in updating stock management system leading to incorrect procurement decisions Staff motivated, trained and sensitized for keeping the stock management system updated at all times. Monthly internal audit & adhoc audits implemented to ensure stock management system is kept updated at all times and discrepancies in observed in audit are addressed within defined timelines. Operational Time requirement of purchase team in calculating and collating stock data reduced to some extent but the process is still vulnerable to the risk of incorrect / delayed updates to stock management system. Also, stock management system does not forecast material requirements. Stock management system updated to analyze past consumption patterns and future production schedules to forecast material requirements. Stock management system and manual workings run parallel for about 3 months to ensure accurate working of the system forecasting. Stock management system gives details of consumption and stock levels for raising purchase orders Defined Purchase requisitions raised by factory based on data from stock ▪ Purchase requisition raised by factory may not reflect upon the expected price fluctuation or change in market demand Procurement team monitors the evolving business environment, price trends of materials and gets timely inputs from the marketing Strategic Procurement team has to follow up with marketing team for inputs on future demand of products Meetings and trainings organized between marketing and procurement team to sensitize regarding the importance of demand Procurement tam has matured from managing day to day operations to managing strategic risks for the company,
- 11. Risk Management Through BPM Fueling Business Growth Extract of an example involving purchase requisition process Process Maturity Level Process Risk Risk Mitigation Measures Through Different Maturity Levels Risk Classification Process In-Efficiency Business Process Improvement Implemented To address inefficiency Efficiency achieved through different levels of maturity after Business Process Improvement Implementation management system team before raising purchase orders information for procurement process defined a template and timeline for sharing future demand information. Improvement in job satisfaction and hence direct positive impact on efficiency. Quantitatively Managed Purchase requisitions raised by factory based on data from stock management system. ▪ Performance of the Purchase Requisition process not monitored for efficiency and further improvement ▪ Possibility of failure of the improvements implemented through different maturity levels Production HOD monitors and investigates reasons for delays in receipt of material to minimize adverse impact on production Strategic (Since it directly impacts the internal business process improvement strategy) Metrics not defined for measuring performance of process improvements Key Performance Indicators discussed, defined and implemented for monitoring process performance. KPI’s made part of employee performance appraisals and management information system KPI’s defined for measuring process performance. Purchase requisition process delegated to factory team thus enabling procurement team to focus more on procurement strategy and adding value to the organization. Optimizing Purchase requisitions raised by factory based on data from stock management system. KPIS defined and monitored ▪ KPI’s not updated to reflect upon changing business environment and business requirements KPI’s defined at the time of last business process improvement cycle being monitored. Strategic (Since KPI’s may not reflect upon current and future business requirements) KPI’s not updated Process for updating KPI’s to be implemented based on relevant inputs from relevant departments. KPI’s updated to reflect upon current and changing business environment.
- 12. THANKS & REGARDS By Mritul Kapadia ERM and Business Process Expert Mail id : ermconsulting.professionals@gmail.com