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University of Wisconsin-Milwaukee ERM Status Report

Recap Key Elements, Results & Next Steps of UWM's Enterprise Risk Management initiative. Chronology, ERM activities, impacts, likelihood, controls, mitigation, and Steering Committee outputs.

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University of Wisconsin-Milwaukee ERM Status Report

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  1. University of Wisconsin-MilwaukeeEnterprise Risk ManagementStatus ReportJanuary 30, 2013andFebruary 8, 2013

  2. Agenda Recap key elements of UWM’s initiative Results to date Next steps

  3. Recap of Key Elements

  4. Enterprise Risk Management (ERM) A comprehensive program designed to proactively and continuously identify and manage real and potential risks and opportunities that may impact UWM’s operations. • “Risk” is defined broadly to include anything that might preclude UWM from achieving its goals or objectives. • Fits into the UWM’s culture, and leverages current governance, controls and capabilities. • UWM is coordinating ERM and Strategic Planning efforts.

  5. ERM and Strategic Planning Best business practice: • Always consider risk when formulating business strategy. • If risk is not considered during strategy setting, tendency to gravitate toward opportunities with highest return, regardless of risk. • Drivers of value provide context for strategy setting as well as risk assessment.

  6. Ensure UWM Learns from Classic ERM Failures throughout History 1637: The Tulip and Bulb Craze 1720: South Sea Bubble 1981: Schlitz Brewing 1985: Allis-Chalmers 1989: S&L Crisis 1995: Barings Bank derivatives scandal 2001: Tech bubble burst 2001: Enron 2002: Arthur Andersen 2002: WorldCom 2007-11: Housing collapse 2008: Financial system partial collapse 2008: Stock Market collapse 2009: Koss Electronics 2009-10: Great Recession 2010: BP Gulf of Mexico oil spill 2011: Default flirt/US downgrade/European debt crisis 2012: Knight Capital 2012: Blockbuster

  7. Chronology of UWM’s ERM Activities • July 2012 • UWS presents to Chancellor’s Cabinet. • August 2012 • Chancellor invites certain faculty, staff and students to participate in ERM activities. • September 2012 • Chancellor and seven other senior managers participate in one-on-one phone interviews with ERM consultants, Core Risks, LTD. • UWS conducts orientation for all ERM participants. • Electronic survey sent to 80 faculty, staff and students. • October 2012 • Core Risks leads two full-day Workshops for 45 participants. • Core Risks leads one full-day session for Steering Committee for 14 participants.

  8. Results to Date

  9. Interview and Survey Results Core Risks consolidated interview and survey results into a list of 42 “perceived” risks, including three identified as “System-wide” risks(S10-3, S9-3, S9-1) • Three additional risks were identified during the two Workshops: • Graduate Student Support (12-A) • Equipment for labs, etc. (12-B) • Library (12-C)

  10. Workshops • Each Workshop discussed and assessed approximately 26 risks with 12 common risks being validated and ranked in both Workshops. • Workshop participants anonymously voted on risks, assessing: • Whether further refinement of identified risk was needed. • Levels of controls currently in place. • Material impact to UWM or UWS. • Likelihood of the identified risk occurring. • Remediation vs. retention • Finally, Workshop participants were asked to judge whether cost to address a particular risk would be > $25,000 in time or money.

  11. Impact and Likelihood IMPACT * 1 LOW 2 MODERATE 3 HIGH 4 EXTREME * BASED ON UW-MILWAUKEE MATERIALITY MATRIX LIKELIHOOD 1 LOW 2 MODERATE 3 PROBABLE 4 ALMOST CERTAIN

  12. Likelihood The likelihood that a risk will occur within next 36 months recognizing current controls Likelihood Scale: 1 = Low – Possible but unlikely to occur; remote. 2 = Moderate – Moderate risk of occurrence; maybe. 3 = Probable – Likely to occur. 4 = Almost Certain – Very likely to occur in immediate future (probable). More Likely to occur 75% 50% Less Likely to occur 10%

  13. Controls & Cost CONTROLS 1. NONE/WEAK 2. LIMITED 3. MODERATE 4. STRONG COSTS 1. HIGH (greater than $25,000) 2. LOW or NONE

  14. Risk Retention & Risk Mitigation • Risk Retention. If an identified risk is within Risk Retention, it is accepted at this time without the need for additional action. Current controls are retained, maintained, and monitored. • Risk Mitigation. If an identified risk is not within Risk Retention, then further mitigation is planned and prioritized.

  15. Retention vs. Mitigation Does this need to be placed in Risk Mitigation? • Yes • No

  16. Workshop # 1 Heat Map

  17. Workshop # 2 Heat Map

  18.  Steering Committee • Reviewed full list of 45 risks at “a high level”. • Conducted an in depth discussion of: • Top 14 “high cost” risks as ranked by the Workshops. • Top 13 “low cost” risks as ranked by the Workshops.

  19.  Steering Committee Outputs The top ten high-cost risks as ranked by Steering Committee during anonymous voting process: • Faculty/Staff morale issues. (12-37) • IT/systems and resources: Historically underfunded IT with impact on network, WI-FI, research storage and lack of strategy for cloud computing. (12-1) • Brand/Identity: What is UWM? (12-31) • Compliance challenges. (12-34) • Operational constraints: lack of funding for new assets initiatives and infrastructure. (12-7) • Strategic student enrollment process (opportunity). (12-18) • UWM’s role in the future of higher education: rising tuition, student debt, competition (including from other UW campuses). (12-36) • Fundraising: Limited resources and processes. (12-36) • Administrative risk: Limited ability to provide administrative infrastructure that can support campus growth. (12-23) • IT/other: lack of back-up for Data Center and power for critical buildings. (12-4)

  20.  Steering Committee Outputs (continued) The top ten low-costrisks as ranked by Steering Committee during anonymous voting process: • Prioritization of resources/project management. (12-20) • Financial planning controls and tools. (12-5) • Proper documentation for international students and tracking of all admitted students. (12-35) • Multiple initiatives (>31) may result in employee burn-out or inability to complete certain projects. (12-29) • Crisis/Complaint management: anonymous hotline for complaints, etc. (opportunity). (12-8) • Town-gown relationships (opportunity). (12-32) • HR system: employee performance management . (12-38) • Lack of process for expedited decision making. (12-39) • Limited collaboration across Schools and Colleges. (12-24) • Making Honors College, Study Abroad Programs, etc. more visible (opportunity). (12-13)

  21. Next Steps

  22. Coordination with Strategic Plan • Governance for Strategic Plan includes a “Core Planning Team” with oversight responsibility for operational teams (5 Functional and 12 Thematic). • The “Data Gathering and Benchmarking Functional Team” will collect relevant data, including all ERM reports for use by each of the 12 Thematic Teams. • Thematic Teams will evaluate the risks identified in ERM for preparing goals and objectives related to their areas.

  23. Thematic Teams • Top-tier Research University • Sustainable Prosperity • Academic Planning • Enrollment & Student Life: Recruitment, Retention & Remediation • Access, Diversity & Inclusion • Financially Sustained University • Best Place to Learn • Technology (Digitization & other elements) • Physical Aspects: Green Campus, Master Plan, etc. • Internationalization • BP2W (Human Capital): Faculty & Staff Attraction, Development & Retention • Community Engagement

  24. Develop a Comprehensive ERM Framework Elements of framework suggested by UWS: • Identify ERM Sponsor(s). • Charter a Risk Council with authority to assign risks to owners. • Risk owner identifies team members and develops risk mitigation plan. • Risk Council reviews risk mitigation plan and determines if it will accomplish desired objectives. • Risk Council consolidates risk mitigation plan reports and communicates as part of budget strategic planning cycle. • If not accepted, the risk mitigation plan is sent back to risk owner for further development of Risk Council for further clarification. • Risk Mitigation plan is implemented. • Establish process to identify new risks on a regularly scheduled basis. • Develop program to increase campus awareness concerning risk.

  25. Risk Ownership Remember… Risk Ownership is important and to be a Risk Owner is a good thing! • Qualities of a UWM Risk Owner: • Owners should have significant influence over their assigned Risk Driver(s). • Owners will be individuals. • Owners will be accountable. • UWM Risk Owners: • Work to determine the Risk Retention parameters for a particular Risk Driver. • Develop Mitigation plans to return Risk Driver(s) to Risk Retention. • Perform ongoing monitoring of their Risk Driver(s) to assure that Risk Drivers remain in Risk Retention.

  26. Status Report Wrap Up Questions?

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