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ERM IN A CULTURE OF INNOVATION
Laura Langone
Sr. Director, Global Risk Management
Juniper Networks, Inc.
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Page 1
Housekeeping Information
 Keep this page to insert information.
_____________
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What to Expect
 Consider alternate development and implementation
approaches to your ERM program
 Assemble techniques for managing risk in a complex
and decentralized environment
 Get tips on creating your own risk appetite statement
and key risk indicators tied to performance
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A Culture of Innovation
Innovation Defined, Wikipedia
Innovation Life Cycle, Wikipedia
 An application of better solutions
 Meeting unarticulated needs
 Can be either more effective products,
processes, services, technologies, or ideas
 Disruptive Technology – is something
original and, as consequence, new that
"breaks into" the market or society and
obtains a foothold in a market.
Typically, growth companies are innovators.
Start-ups willing to take more risk.
But as companies mature, margins and revenue
are of greater concern and while maybe not
defined a company’s risk appetite changes.
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Successful Innovation Execution
Harvard Business Review, May 2012
Managing Your Innovation Portfolio
Managing
Innovation Successfully
Diversity your innovation portfolio by balancing the mix of
innovation across three levels of innovation ambitions:
1. Core Innovation Ambitions – These include initiatives that
are incremental and enhancements to core offerings, such as
new additions to existing products or services that utilizes
assets the company already has in place (i.e. a small risk
undertaking).
2. Adjacent Innovation Ambitions– These expand the existing
business by leveraging what the business already does well
(part core initiative) into adjacent new spaces or uses.
3. Transformational Innovation Ambitions – These initiatives
represent those viewed as breakthroughs or creations of
entirely new offerings, businesses, or markets (i.e. a very high
level of risk to manage).
And evaluating the risks to failing to do so effectively and/or
manage key risks impacting innovation.
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Identify Risks to Innovation Execution
Harvard Business Review, May 2012
Managing Your Innovation Portfolio
Risk to Innovation
Failure to diversity your innovation portfolio by balancing the
mix of innovation across three levels of innovation ambition
Disruptive Technology – Someone else has disruptive tech
that negatively impacts your company products and market
share sooner than anticipated.
Failure to transition products timely and successfully (i.e.,
GTM strategy, infrastructure to support product sales and
acceptance)
Failure to optimize full product suite to existing or other
customers.
Other risks: Industry consolidation, lack of clear strategy,
industry risks, external events.
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Utilizing ERM in Growth Companies
 ERM frameworks still apply
 Prioritization of elements to focus may differ
 Risk Appetite may be greater than other areas
 Product life-cycles shorter
 Decision making more nimble
ERM should be adapted to meet your culture, current
risk appetite, and decision making environment to be
sustainable and relevant
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ERM Components
Adopt framework including
standard components:
1.
2.
3.
4.
5.
6.
-
Risk Governance
Risk Appetite/Tolerance
Risk Assessment
Risk Mitigation & Ownership
Monitoring & Reporting
Assurance Process
Risk
Assessment
Risk
Appetite
Risk
Mitigation,
Monitoring
& Reporting
= Execution on Innovation
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Page 8
Focus on Strategic Risks
Execution on Innovation Pipeline is critical
RIMS Strategic Risk Assessment Model
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Juniper Networks delivers innovative network solutions and builds
partnerships that support our customers' growth ….
2013 Revenue: $4.67 Billion
Global Presence: 123 Offices In 47 Countries
9,600+ Employees
Doing Business With 99 Of Fortune Global 100 and Top 100 Service Providers
Powering 7 Of The World’s 8 Largest Stock Exchanges
Helping Our Customers Build The Best Networks for Their Business
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Page 10
Risk Infrastructure
Building a sustainable risk management infrastructure across the enterprise is
a multi-prong approach:
1) Establish oversight for risk at the appropriate levels of management
2) Develop a consistent process for evaluating, mitigating and reporting
on critical risks.
3) Ensure accountability to Risk Owners to mitigate risks and report
progress on activities and provide directional support as needed
Develop risk governance model
Develop risk universe
Risk
Governance
Risk Infrastructure
Identify
from defined
risk register
Define Risks
risk prioritization
criteria
Integrated Risk
Management
Approach
Assess and prioritize risks
Identify risk owners
Identify drivers & mitigation
Integrate with corporate processes
Risk Ownership
Develop risk monitoring/reporting
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Risk Governance and Ownership
Top Down Directive to identify and evaluate our top
strategic and operational risks impacting our ability to
achieve our business objectives.
Board of Directors – Oversight for key risks and governance
Audit Committee – Evaluates risk management process
Supply Chain
Risk
Management
IT Risk and
Compliance
Risk
Management
Working Team
(VP Level)
EC – manages the program and mitigates the risks
Quality
Council
Risk Management Committee
(EC Level) & RMWT (VP Level)
Compliance & SOX
Sales Risk
Management
(TBD)
Risk Culture is improving!
Business Units & Functional Areas are taking more
accountability for risk management.
Strategic
Risks
Operational
Risks
Financial
Compliance
Risks
Risks
This took time to change the culture.
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Juniper Confidential Restricted Distribution
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Appetite for Risk
Return
Risk
Tips
 Establish boundary statement
 R&D Spend Correlates Appetite
 Focus on tolerance levels impact
ability to allocate more into product
development
How much risk are you willing to take in pursuit of your business and strategic objectives?
What risks could erode those returns and what can you tolerate on an individual risk basis?
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Measure Risk & Return
Key Risk Metrics
Key Performance Indicators
A predictive measure or early warning signal that detects
changes in risk exposure
Link between strategy, execution, and performance
management
A measure to monitor the progress of risk mitigation
activities (status and effectiveness)
Typically provide a periodic assessment of historical business
performance, but can also provide leading indicators of future
performance.
Measure the specific risks related to strategy or execution
Connecting ideas, disciplines, people, realms
KRIs are measured against thresholds that trigger escalation
and further action; KPIs are measured against base and
target levels
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Adapted from Source: ©Teacher & Educational Development, University of New Mexico School of Medicine, 2005
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Reporting on Key Risks
Monitor, mitigate, transfer, or exploit risk
-What are the 2-3 best things that can happen if we exploit the risk?
-What can we do to increase the possibility of this favorable impact to happen?
-What are the 2-3 worst things that can happen if we don’t control the risk?
-What will we do to reduce the unfavorable impact of these things happening?
Strategy Map Theme
Objectives
Balanced Scorecard
Measures
Targets (KPI)
Build the Best products
Insert Specific Measures of
the objective
Take market share …..
Insert Specific Measures of
the objective
Disruptive Technologies Insert Specific Measures of
the objective
Intellectual Property
Insert Specific Measures of
the objective
Measures
Top Risks
Target KRI
Qtr Trend
Insert Specific numerical target
for improvement in the
measurement
Insert Specific numerical target
for improvement in the
measurement
Insert Specific numerical target
for improvement in the
measurement
Insert Specific numerical target
for improvement in the
measurement
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Laura Langone
Laura is Senior Director of Global Risk Management at Juniper Networks, the
industry leader in network innovation. She is responsible for Juniper’s
Enterprise Risk Management (ERM) program and global risk management.
Prior to Juniper, Laura worked with several Bay Area companies in Treasury,
Risk Management and Legal roles including Genentech and Oracle. She worked
in insurance defense for Gordon & Rees, LLP. Laura started her career in
casualty underwriting with AIG working the U.S. and abroad servicing large
accounts.
Laura is acting president of Silicon Valley Risk & Insurance Society (SVRIMS)
Chapter,. She received her Juris Doctorate from Golden Gate University School
of Law and a Masters in International Management from Thunderbird School
of Global Management.
Senior Director
Global Risk Management
Juniper Networks, Inc.
[email protected]
Recording of this session via any media type is strictly prohibited.
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