Nicholas Hodges – Chief Executive Officer
My role as CEO in the context of Enron’s Enterprise Risk Management (ERM) Framework is first and foremost the “Owner”. Whilst the senior executive and board of directors have key responsibilities towards our ERM framework, I am ultimately responsible for its implementation and on-going maintenance.
Enron’s culture and attitudes towards risk management are just as important as the risk framework itself. Without true commitment from all stakeholders within the organisation, the framework will not succeed as intended. A successful risk culture is not something that can be switched on immediately and it must be driven from the top. It is my role as CEO to set the tone and clearly articulate the company’s strategic vision and attitude towards the management of risk.
As CEO, it is critical that I lead by example. Insofar as ERM is concerned I must:
? Regularly communicate on risk, ensuring all levels of the organisation are risk focused and that all personnel understand that risk management is a key driver for the CEO;
? Report to the Board of Directors on all risk and compliance matters on a regular basis;
? Demonstrate ethics and transparency in all business dealings – internally and externally. Lack of ethical business practices was a key failing of the former Enron CEO. I am dedicated to undertaking my role in a very different manner. Ethics and transparency will be the cornerstone of my tenure.
? Have equity in the management of risk. Successful implementation and on-going utilisation of ERM will be included in my personal KPI’s.
A key component of any successful organisation and particularly of an ERM framework, is open communication. As CEO I am committed to ensuring that systems are in place to encourage and facilitate communication through all levels of Enron. I will ensure that our Human Resources team are empowered to develop appropriate training regimes and that reward and recognition systems are in place to facilitate a “risk focused” work-force.
I am excited to assume my role as Enron CEO and look forward to presenting to the Government Risk Funding Committee.
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ENTERPRISE RISK MANAGEMENT framework
Yuting Shi – Chief Financial Officer
As a CFO, In terms of the ERM framework, the main responsibility is building and maintaining the control of internal finance and keep the continuous plan for financial recording, resources and activities (Lindsay, 2005).
Additionally, since the risk connected to the proposed strategy, CFO should manage strategic risk, I must:
? Quantize the risk tolerance limit, assess the strategic choices and firm cases and improve the measure of risk and warning signs for the strategic decision’s evaluation and supervision;
? Prepare annual risk profiles and improve the process of establishing and renewing the risk tolerance.
(Lindsay, 2005).
In the process of risk management, the CFO should take the role and duties of Board into account and indicate where the Board could enhance its supervision of risk (Lindsay, 2005). Importantly, the implementation of ERM process should be transparent across the whole business from a Key Risk and Key Controls perspective because it will contribute to the effective execution of decisions if the interest of all stakeholders is considered.
As the auditing problem is a key factor which leads to Enron’s collapse, the audit process needs to be improved and under the new framework the CFO should:
? Cooperate with auditors and make suggestions about the financial management to offer assurance to the Board (Ladd, 2013).
? Suggest the audit committee about its authorization, power and duties
? Work together with the internal audit department to make sure the effectiveness of the process.
? Enhance the ethical business climate to decrease fraud within the corporation (Buckstein, 2003).
References list
Buckstein, J 2003, The changing role of the CFO, Chartered Professional Accountants, retrieved 28 April 2014, < http://www.cga-canada.org/en-ca/AboutCGACanada/CGAMagazine/2003/Nov-Dec/Pages/ca_2003_11-12_ft2.aspx>.
Ladd, LR 2013, The roles, duties, and ethical responsibilities of the chief financial officer, National Association of College and University Business Officers, New York.
Lindsay, H 2005, Risk management: what Boards should expect from CFOs, Canadian Institute of Chartered Accountants, Toronto.
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ENTERPRISE RISK MANAGEMENT framework
James Wadden – Executive Board Director
The previous Enron had many failings, however what cause the spectacular failure was wide spread financial fraud and a culture that had become toxic from top to bottom. With my extensive experience in financial management my role on the board will focus on that side of the business. I will work closely with the CFO to provide support and oversight to specifically focus on the financial risks the new Enron will face. These responsibilities include:
? Establishing new financial controls across Enron that first and foremost ensures accurate, ethical and best practice accounting standards.
? Challenge the processes and findings of the audit function to ensure transparency and constant improvement.
? Work to maintain consistent improvement of financial standards at all levels of Enron. Provide oversight to the CFO on financial strategy. Establish a culture of continuous improvement.
? Working with our CFO to ensure financial metrics of potential opportunities (products, expansions etc.) are accurately analysed for cost vs. benefit.
? Ensure that Enron is adhering to all ASX rules, regulations, compliance and expected behaviours. I will work closely with the CFO to provide support to ensure that controls are adhered and that the new culture of compliance is actively cultivated.
? Develop risk profile for Enron that sets a low risk tolerance to ensure previous mistakes cannot happen again. Ensure that reporting on risks is transparent and comes from all areas of the firm.
As a board member I believe that outside of our specific tasks it is the role of the entire leadership team to set the tone for the new Enron, we must all interact on risk reporting quarterly whilst working to identify, cultivate, and maintain the culture desired at the new Enron.
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ENTERPRISE RISK MANAGEMENT framework
Phillip Polack – Independent, Non-Executive Board Member
The new Enron Executive Management approached me with the hope I would join their new Board for what is an important era for both the company and the enormous amount of stakeholders.
My roles and responsibilities in regard to the Enterprise Risk Management Framework will include:
? Critical probing of the company’s direction, strategy, and business approach – thereby ensuring the correct strategic directions and decisions are made amongst possible alternatives;
? Evaluate the calibre of senior executives’ strategy making and strategy executing skills – determine whether the CEO is performing his job well and making the correct decisions;
? Agree and implement a compensation plan for the senior executives that reward them for actions and results that serve shareholder and other stakeholder interests;
? Overseeing reporting processes of the risk management practices as established by the Senior Executives;
? Oversee the company’s financial accounting and financial reporting practices – all board members have a fiduciary duty to protect shareholders by exercising oversight of the company’s financial practices.
Additionally, due to my extensive management experience in Non-Executive Director and Chief Executive / Managing Director capacities I shall accept the role of Chairman to the Board, which includes the responsibilities of:
? Providing leadership to the board and its directors;
? Assuming responsibility for the boards composition and development;
? Planning and conducting board meetings effectively;
? Ensuring the board focuses on its key tasks;
? Engaging the board in assessing and improving its performance;
? Overseeing the induction and development of Directors;
? Supporting the Chief Executive / MD.
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ENTERPRISE RISK MANAGEMENT framework
APPENDICIES
Table of Contents – Appendices 6
(a) Enterprise Risk Management Framework 7
(b) ERM
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