Transforming Risk Culture at Swissgrid: Key Decisions & Processes

1 7.3 Group Project: Swissgrid Deliverable 4 Daniela Cedeno, Greer Koerner, Marcel Melo, Thomas Vining Embry-Riddle Aeronautical University HROM 510 – Enterprise Risk Management Professor Chris Mandel December 04, 2022

2 What decision-making process has Meyer installed as part of the ERM process? As Segal (2011) discusses in the text, the risk decision process aids in determining whether the company’s decisions have impacted company value – have those decisions led to an increase or not (Segal, 2011) . This process is inclusive of:  Embracing risk culture  Ensuring risk is managed at an appropriate level  Increase company value (Segal, 2011) When Kurt Meyer, Chief Risk Officer gets to Swissgrid, he recognizes that the organization needs a risk transformation and implements a similar risk manager structure at Swissgrid that he had at a prior organization. One primary task the CEO of Swissgrid charged with him was to raise awareness. With the support of CEO and executive leadership, Meyer publishes a directive that is adopted as policy and all employees are expected to follow with regards to identifying significant risks that would ultimately lead to impacting company value (Kaplan & Mikes, November 2018) . This policy was also discussed during all-hands meetings, company messages and other company events held by executive leadership. Another way Meyer demonstrates risk culture is the risk systems and communication platforms. To keep all employees engaged and informed they utilize an ERM system tool to manage and control risks, a real-time platform for crisis management, and utilizing a communication platform – Risk Talk, where employees can report risks (Kaplan & Mikes, November 2018) . Through the implementing platforms at Swissgrid by Meyer, the siloed approach comes to a halt, and cross-functional communication emerges to embrace this risk culture that ultimately improves the risk decision process for executive leadership.

3 The risk information that is collected from each of his risk managers from the assigned business units is then compiled and presented to the supervisory and executive boards. Meyer briefs any changes to risks that may have significant impact to the organization and shows risks masks for executives/board to review – looking both at a granular and technical level. Based on these reviews, executives determine how to proceed based on the risks (Kaplan & Mikes, November 2018) . In the case study of Swissgrid, Meyer emphasizes the importance of embracing the risk culture through several communication channels to the organization. Then through the execution of managing risks at the lower levels, the risks are compiled for the executive leadership/board to review and ultimately determine risk limits/appetite that will not decrease but improve company value. What decisions made by Swissgrid do you agree/disagree with? Explain. Swissgrid is a significant company with various connections in different regions. Therefore, the company is prone to deadly risks that need good risk decision-making processes to survive. Several decisions have been made to curb risks in the company, most of which I have agreed with and some against. For instance, I supported the decision to increase risk culture awareness by introducing risk management responsibilities and goals to the supervisory board (Kaplan & Mikes, 2018). It was a wise decision since it promoted proper risk assessment, identification, and reporting to the relevant authorities. The decision also ensured all risk officers focused more on their assigned business units and prioritized their core responsibilities to avoid more risks. The risk management responsibilities and goals were accepted and understood by most staff. Organizing extraordinary workshops to identify and assess emerging risks was also a wise decision and a master plan for risk management (Kaplan & Mikes, 2018). The decision

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4 presented a proactive risk assessment and identification that ensured the executive members were prepared for new risks and challenges to Swissgrid. Although most of the decisions made by Swissgrid were good and master plans towards identifying, assessing, and managing risks facing the company, some of them were not suitable for the ERM framework of the company. For instance, implementing an intelligent reporting risk control system such as All-Seeing Eye (ASE) was not an effective and reliable decision (Kaplan & Mikes, 2018). Although the system promoted accountability within the company, it could not multi-task and it was limited to risk-reporting platforms only. Despite having the system, Swissgrid had to input quality risk assessment and mitigations in place. It would be wise if Swissgrid implemented a multi-task system that could identify risk, assess, and mitigate it. Therefore, Swissgrid needs to revisit some of its decisions to improve its ERM framework. What changes could Swissgrid consider in their ERM process as it relates to decision- making? Swissgrid had a strong ERM process in place after, Kurt Meyer, Chief Risk Officer, took over the role. He made a transition of what was in place to define, quantify and manage any possible risk by making changes in their processes of acknowledging and reporting. Meyer implemented the 7x7 impact objective matrix, a probability-frequency scale, updated impact categories, and multidimensional scales. These processes are not only for every employee to understand the risks but also to help executive officers in their decision making. One of the changes that Swissgrid may need to consider in the ERM process is the frequency of workshops. At Swissgrid there is a risk officer in every department of the organization. Every risk officer decides how often a workshop is developed throughout the year. For example “The risks officers for Market and Grid conduct semi-annual formal risks

5 assessment and keep on top of changing risks in face-to-face discussions throughout the year” (Kalpan & Mikes). Opposed to the CEO, Rosentreter who “only runs an annual workshop” (Kaplan & Mikes). These workshops should be done with more frequency in order to keep everyone in the organization updated and aware of risks at all times. It also demands more attention, consciousness, and keeps everyone mindful of any new risks that may out there by not counting on any new employees that may come on board. It is not about just reporting, it’s about doing “something about the risks exposures” (Segal, 2011). In order to make a decision on time, it does not matter how many tools, risks maps or scales might be in place, it’s a matter of having the information almost instantaneously. Also, as executive officers get notified and informed of key risks, every team member of the organization should also be aware of these in order to work in the same direction. Multiple workshops a year will not only uncover possible risks but also keep the organization trained and informed in real time. In order to better their decision-making capabilities, Swissgrid may need to consider the number of workshops that need to happen throughout the year. Additionally, the organization should make the workshops simultaneous in every department so it would be equal across the board. How well does their process compare to the process outlined in Segal’s Chapter 6? Segal mentions that “most ERM programs suffer from an inability to integrate ERM into decision making” (Segal, 2011). This is not particularly the case with Swissgrid’s approach to ERM. Swissgrid was able to incorporate ERM into most facets of their decision making from empowering risk managers to creating a CEO-level policy that establishes roles for all employees. The goal for Swissgrid was simple; they empowered all employees to “inform others

6 about risks that they see, take responsibility for certain mitigation actions and implementations, or support and advise” (Kaplan & Mikes, 2018). In comparison, Segal outlines the value-based ERM approach as the single most important purpose is to make better decisions (Segal, 2011). This is accomplished by integrating enterprise risk management and value-based risk management (risk and return) to increase the company’s value by making better risk/return trade off decisions. While Segal utilizes a risk management model to calculate the risk/return metrics of an organization, Swissgrid utilizes a similar tactic with a “risk map” and risk database to show current, previous, and target risks. This is a highly similar comparison to Segal’s process because it integrates the origination’s information into a bigger picture and defines the organization’s risk appetite. Ultimately, this allows management to collect all information that it needs to evaluate all risk/return trade off and make decisions based on the risk/return metrics. This technique has allowed Swissgrid to establish a risk appetite but prioritize certain things like safety as well as anticipate certain crisis situations. These techniques, while different approaches, are very similar in comparison to one another and allow for both strategic planning and better business decision making. Both value-based ERM processes for Swissgrid and what Segal describes, incorporate a similar process by empowering individuals to make better decisions based on evaluating risk and return and ultimately increasing the organizations value. While they Swissgrid and Segal’s processes might differ in the approach, the methodology utilized by both are parallel by nature to accomplish the same task. Both ERM programs integrate key functions necessary for long term strategic planning and business decision making which is key in a successful ERM program.

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7 Without this type of approach, organizations would not be able to properly identify risks that could have a lasting impact on their respective organizations.

8 REFERENCES Kaplan, R.S & Mikes, A. (November, 2018). Swissgrid: Enterprise Risk Management in a Digital Age. Harvard Business Publishing Education 9-119-045. Segal, S. (2011). Corporate value of enterprise risk management: The next step in business management. John Wiley & Sons, Incorporated.

Cedeno, Koerner, Melo, Vining- 7.3 Group Project- Swissgrid Deliverable 4

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