This document discusses cycles of disruption from external events like natural disasters, man-made disasters, political unrest, and financial crises. It presents a framework for risk appetite with three levels: governance level focusing on risk appetite and strategy, planning level analyzing risk exposure, and operating level identifying and monitoring risks. Finally, it shows how integrating risk management into strategic planning can help a large retail organization rationalize its footprint to fund future growth.

1. Disruption and your Firm’s Risk Appetite
The Ohio State University | Fisher College of Business | The Risk Institute
October 8, 2015
Laurie J. Champion
Managing Director, Aon Risk Solutions
laurie.champion@Aon.com | Aon.com

2. Cycles of Disruption – External Events Natural Catastrophes
Man-made Disasters
Political Unrest
Financial Crises
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
2008-2009
Financial
Crisis/Great
Recession
2010 Chile
Quake
2011 Arab
Spring
2014 Thai Coup
2014 Crisis
Ukraine/Crimea
2011 NZ
Earthquake
2012 U.S.
Drought2010
Deepwater
Horizon Oil
Spill
2004 Ivan /
Charley
2005
Katrina,
Rita and
Wilma
2012
Hurricane
Sandy
2011 Thai Floods
2011
Japan
Tsunami
2011 US
Tornadoes
2008 Ike

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A Framework for Risk Appetite
Information Decisions
Governance Level
(Executive
Management)
Strategy & Vision
Risk Appetite
Tolerance Filter
• What risks do we want/need to take?
• What could impact our core strategic goals &
objectives?
Planning Level
(Executive /
Leadership Team)
Risk Profile / Risk Exposure
Risk Metrics & Scorecards
Risk Trends & Correlation
Risk Management Strategy & Execution
Analysis & Prioritization Filter
• What level of analysis is appropriate?
• What tools should be used?
• Who should lead and who should advise?
Operating Level
(Management)
Risk Identification / Monitoring
Risk Management Activities
Performance / Execution

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Common Sense Insights
 Building Muscle Memory
 Leadership Alignment
 Plan, Practice and Post Mortem

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Aligning Strategic Planning and Risk Management to Create Value
• Broad awareness of cost
structure and
vulnerabilities to both
near-term profit and longer-
term ability to fund
expansion in growth areas
• Leadership team
consistently aware of the
need for change, but
having difficulty deciding
where that change should
be focused
• Incomplete
understanding of the
strategic imperatives and
business fundamentals
at the operating level;
focus on maintaining
culture and reputation in
the field
Situation: a large multi-state retail organization had grown through acquisition and expansion
over many years and needed to rationalize its current footprint in order to fund future growth. An
integrated risk management process was used to enhance business analysis and strategic
planning across multiple business units and geographies.
• Leadership and Board
Consensus on current
state, future state and
prioritized actions to be
taken to support the
strategy
• Documentation of
planning assumptions and
priorities
• Agreement on metrics
and measures
• Understanding of
enabling framework
needed to drive change
and growth – a critical
outcome
• Board Agreement to 3-5
year business plan
Dra
ft
Hig
h
Lev
el
Dis
cus
sio
n -
BO
D
Me
etin
g
(No
ve
mb
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(Ja
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Exe
cute
Initia
tives
Trac
k &
Moni
tor
Prog
ress
Rep
ort
Pro
gres
s to
Man
age
men
t &
Boa
rd
P
r
o
j
e
c
t
C
h
a
r
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Divisi
onal
Revie
w By
Facilit
y,
Regio
n,
Marke
t
Gate Review
Executive Team
Gate Review
Executive Team
Tea
m
Res
ourc
e
Iden
tific
atio
n
Rul
es
of
The
Roa
d
Cor
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Pla
nnin
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Ass
ump
tion
s
Proj
ect
Too
ls
-
Dec
isio
n
Tre
e -
Tra
ckin
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Opti
ons
Ass
ess
men
t
Ena
blin
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Too
ls
-PM
Soft
war
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-
Visi
oCo
mm
unic
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ess
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Deve
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Decis
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Varia
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Data
Point
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Agg
reg
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to
Divi
sion
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Pla
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e
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Ini
tia
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D
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Tr
ee
Agg
reg
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to
Cor
por
ate
Pla
n
Ac
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n
Pl
an
s
Ti
m
eli
ne
s
D
ev
el
op
ed
Business
Analysis
-Maps,
distribution
reach
-Current
Performance
-Facility
Information
(capacity,
technology)
-Current
equipment
utilization
-Market
Share
-Customer
demographic
s/
prospects/ma
rket potential
-Competition
-Capital
Requirement
s
-People/labor
resources
V
a
l
i
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a
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H
y
p
o
t
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s
i
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;
D
i
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A
l
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a
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i
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e
s
R
e
v
i
s
e
H
y
p
o
t
h
e
s
i
s
Assess
Financ
ial
Impact
of
Propos
ed
Decisi
ons
Off
sit
e
M
an
ag
e
m
en
t
Te
a
m
Re
vie
w
(O
cto
be
r)
Re
vie
w
Pro
ces
s &
Met
hod
olo
gy
wit
h
Bo
ard
(Se
pte
mb
er)
Stay
Maintain
Grow -- Acquisition
Grow -- Organic
Grow -- Outsourcing
Grow -- Partnering, JV
Maintain -- Long Term
New Customers
New Products
New Services
New Channels
New Sites/Current Geography
New Sites/New Geography
No Change
Improve Efficiency
Replace/Outsource
Consolidate
Exit
Conduct Business Review
(Core Team)
Stay
Exit
Gather Existing Data and
Analyses
Maintain
Gro
w
Grow -- Acquisition
Grow -- Organic
Grow -- Outsourcing
Grow -- Partnering, JV
Maintain -- Long Term
New Customers
New Products
New Services
New Channels
New Sites/Current Geography
New Sites/New Geography
Maintain -- Short Term
No Change
Improve Efficiency
Replace/Outsource
Consolidate
Exit
Sell Intact
Sell Assets
Repurpose
Mothball
Sell
Save
Before AfterProcess

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Questions?