Growing in My Risk Perspective: SMF Graduate’s Story with The Risk Institute

We often associate risk with something that has a negative connotation, while missing out on the fact that risk is faced with any unexpected outcome, whether good or bad. Before starting my master’s degree, I worked in a bank where for us, the word “risk” meant that there was a fair chance of events going awry.

When I started the SMF program at The Ohio State Fisher College of Business, The Risk Institute’s Monday evening sessions caught my eye and I soon realized that risk meant so much more. There were different aspects of risk such as financial, political, operational and cyber, to name a few. Risk management teams would work to ensure that the risks faced by an organization were mitigated/reduced.

The Risk Institute hosted educational sessions with an array of speakers to give insight into the diverse risks that their companies anticipated, faced and tackled. All these sessions were immensely informative and interesting. What I had anticipated being a subject with a negative connotation, turned out to be a whole new world of meanings. In addition to the guest speakers, Phil and Denita at The Risk Institute guided us in the scope of risk in this day and age, which led me to take on coursework for enterprise risk management.

As a part of the Enterprise Risk Management course, I worked on one of the risk projects for Abbott Nutrition at their Columbus Plant. The project seemed fairly simple on paper, however, as our team began working we soon realized its complexities. The scope of the project was a bit broad and we were still in the process of getting acquainted with the risks that Abbott Nutrition’s plant faced vis-à-vis other technical risks that we had studied in classrooms. We decided it would be best to seek out The Risk Institute’s advice on how to go about our project. Phil was more than happy to help us formulate a plan of action and to advise us on how such projects were done by The Risk Institute. Throughout the short term of our project, Phil, Denita and our sponsors at Abbott Nutrition were involved and continually provided feedback. This helped us in delivering a product that was ultimately appreciated by Abbott Nutrition.

In addition to the curriculum, the members of The Risk Institute have also helped me with my job search. They suggested prospective employers, networking events and connected me with professionals who have considerable expertise in the field of risk management.

To sum up my experience, it was wonderful working with the members of the Risk Institute and I plan to give back to The Risk Institute in whatever way possible in the future. I graduated in spring of 2017 from Fisher College of Business after completing my SMF degree. I am currently on the lookout for roles and opportunities.

Assessing The Quality Risk of Offshore Manufacturing

Does offshore production pose an added quality risk relative to domestic production? And if so, what factors influence quality risk? The study, “Quality risk in offshore manufacturing: Evidence from the pharmaceutical industry” by John V. Gray and Michal J. Leiblein at the Fisher College of Business at Ohio State, co-authored with Aleda V. Roth at Clemson University’s College of Business and Behavioral Sciences, attempts to answer these questions by examining a series of invariant quality-risk measurement controls.

Companies are hopeful that offshore plants will become lower-cost “clones” of U.S. operations. While many believe this to be a significant cost-cutting strategy, the study proves that quality risk suffers in offshore manufacturing. The research defines quality risk as the propensity of a manufacturing establishment to fail to comply with good manufacturing practices. It is a proxy for the likelihood that a product shipped from a given establishment will not perform as intended due to manufacturing-related issues.

The researchers focused on U.S. pharmaceutical companies with offshore production in Puerto Rico, where 16 of the top 20 drugs in the United States were produced at the time of the study. To assess quality risk, the authors used inspection data from the Food and Drug Administration, providing a consistent, unbiased, third-party measure of quality risk in the highly regulated industry. To assess quality risk, they examined 30 matched pairs of U.S. and Puerto Rican pharmaceutical manufacturing facilities. The pairs had the same parent companies and produced similar products.

The researchers measured and controlled factors influencing quality risk in offshore manufacturing, finding: greater potential for expropriation of assets and intellectual property; political, social, and currency instability; issues related to insufficient worker experience and infrastructure; more pronounced cultural issues, language, and communications incompatibilities.

When these factors were measured in depth, they revealed the following:

  • The higher the educational level of the local population from which the plant’s employees are hired, the lower a plant’s quality risk
  • The greater the agglomeration of related plants in the geographic area of the plant, the lower the quality risk of an individual plant in that area
  • The greater the geographic distance between the plant and company headquarters, the higher the quality risk of the plant
  • The greater the cultural distance between the firm’s home country and the offshore plant, the greater the increase of quality risk at the offshore plant

In conclusion, the study warns, “Many top-level executives may be easily blindsided by the numerous perceived upsides of offshoring, and may too easily dismiss the downside operational risks beyond the obvious.”

View the full research here.

Join us for the June 20th Executive Education Session

Growth through M&A is a high stakes game – every merger can have an impact on both the risk exposures and risk management strategies of the combined entity. Whether your company is seasoned in these types of transactions or embarking on its first acquisition, risk management plays a crucial role in providing the right risk due diligence, risk transfer solutions, as well as providing insight into the strategy, objectives, valuation, funding, costs, and integration.

Getting it right matters – there are large sums of money, time, and resources wrapped into each organizational change.

Join The Risk Institute and our experts from academia and industry for a lively discussion about the delicate balance of risk and reward in M&A.  Guest speakers include:

Isil Erel, PhD
Professor of Finance, The Ohio State University Fisher College of Business

Elizabeth A. Mily
Managing Director, Global Healthcare Group, Investment Banking Division, Barclays

Mike Repoli
Mergers & Acquisitions, Gallagher Bassett

Gavin Waugh

Vice President and Treasurer, The Wendy’s Company


This event has been rescheduled for Fall 2017. More details to come.

July summer session takes deep dive into critical work-force challenges

The U.S. work-force is at a turning point, with change swirling everywhere: Millennials are now the largest generation in the workplace. Baby boomers – and their decades of institutional knowledge – are nearing retirement after putting it off during last decade’s recession. Constant technological leaps are rewriting the rules for the skill sets that matter.

What does this mean for organizations trying to attract and hire today’s talent? How does this change the game for their ongoing efforts to build culture and develop their existing employees?

The Center for Operational Excellence is teaming up with three other centers for a pair of summer sessions focused on today’s greatest business challenges. The first, “Human Capital and Talent Management,” tackles these vital work-force development issues and on the morning of Tuesday, July 18, at the Fawcett Center.

At this session, gain insights on this issue from three compelling angles:

  • M. Gootman, Brookings Institution

    The Big Picture: Brookings Institution Fellow Marek Gootman will be unveiling results of a new work-force survey conducted in conjunction with the National Center for the Middle Market. The survey, set to be released in late June, looks at how middle-market companies – the fastest-growing segment of the economy – are responding to large-scale shifts in work-force dynamics to hire and retain workers.

  • The Ground War: Join talent management VPs Maura Stevenson (Wendy’s) and Kelly Wilson (Cardinal Health), and Kathy Smith, AVP Executive Succession and Development at Nationwide Insurance, for a moderated panel and audience Q&A session on how their organizations are responding to these work-force trends.
  • The Pipeline: Jamie Mathews-Mead, senior director of graduate career management at Fisher closes out the session with a look at how the college is preparing students to best meet companies’ rapidly evolving needs.

After the presentations, enjoy a networking lunch with members of other Fisher and Ohio State centers. Registration is set to open in June, with limited seating available for members and partners of each center.

The second summer session, set for Wednesday, Aug. 16, focuses on the explosion of data and digital disruption companies face and features a keynote from Jeremy Aston, senior director at communication tech giant Cisco. More details will be announced next month.

The One with The Risk Institute: SMF Student’s Success Story on Graduation and Employment

I landed in the U.S. less than a year ago. During this brief period, I completed my master’s degree (phew!) and got a job. Before joining Fisher’s Specialized Master’s in Finance program, all I knew was that I was interested in working in risk management. Ten months hence and I now know I am “passionate” about working in risk management. The SMF was an intensive course, but the professor’s class diversity and student consulting projects made it worthwhile. I chose Risk Management and Corporate Finance as my specialization tracks. As part of the Risk Management track, I signed up for Enterprise Risk Management 1 and 2. It was during ERM 2 that we did our first student consulting project for Abbott Nutrition. The Risk Institute, in collaboration with Abbott Nutrition and Prof. Daniel Oglevee, gave my class the opportunity to work on 3 risk-based projects for Abbott.

All 3 projects were focused on quality assurance. The teams worked on creating a risk model for enabling decision-making, a survey to better understand and improve the risk culture within the company, and risk-based market research. Welcome to the real world! We had learned VAR’s, derivatives and all other academics needed to complete the risk track, but now was the time to use them. The projects we did for Abbott gave us a unique perspective on how risk management was much more than what we learned inside the classroom. During all this, The Risk Institute, especially Executive Director, Philip Renaud, was a huge resource for insights regarding these projects.

During the time we were working with Abbott, we were also working with Vantiv, a partner of the Risk Institute, as part of SMF’s capstone project. For Vantiv, my teammates and I created a risk framework for their M&A activities. This framework added a risk-based dimension to the evaluation of a target for acquisition. It is a unique framework in that it disrupts the traditional valuation methods. I am big on disruptive innovation. I believe we are at a stage where simple innovation no longer gives you the upper hand. I gained an immense amount of experience from working these two projects, and hopefully, we were able to deliver results that were productive for the companies.

During this project, with help from Philip Renaud of The Risk Institute, I was able to connect with a recruiter from Vantiv. That connection went a long way to help me get a job at Vantiv on their lean Enterprise Risk Management team. I plan on staying in touch with The Risk Institute and furthering the work we did for Vantiv. Plus, it always feels good to be back on campus (GO BUCKS!!). I would like to thank Philip Renaud and Denita Strietelmeier for helping me during my year at Fisher and in my job search.

It is a good time to be in Risk management.

Post Executive Education Session Summary: ERM for Nonfinancial Institutions

In our environment of continuing economic uncertainty, attention to risk at the Enterprise Level is important. On May 23, The Risk Institute at The Ohio State University, Fisher School of Business presented, as part of its 2017 Executive Education series, the topic, “Enterprise Risk Management (ERM) for Nonfinancial Institutions”.

This session presented options for businesses just getting started with ERM, businesses trying to improve their current process or those managing economic and business disruptions. The political and economic spheres have ushered in disruptions across the business environment landscape. There is no better time than now to develop and enhance your firm’s enterprise risk management process.  Our session brought to the forefront leading academic work within the ERM space, tools that are being developed to facilitate a smoother process, along with real-world examples of programs currently in place. Our speakers provided applicable examples highlighting the ERM Journey from their industry perspective and how senior leadership approached the challenge.

The session raised conversation with regard to Enterprise Risk Management processes and risk mitigants that businesses can take. Participants involved themselves in a “Think Tank” exercise facilitated by founding member, EY. That facilitated exercise created the opportunity to review a tool that is in place to extend the ERM risk mapping challenges from spreadsheets to a much more user-friendly and interactive process for businesses.

Session leaders, Professor Bernadette Minton, Chair, Fisher College of Business Department of Finance, The Ohio State University; Tammy Izzo, EY Central Region Government and Public Services Leader; Nick Kaufman, Director of Risk Management, Battelle Memorial Institute, Columbus, Ohio and; Ray Roshek, Director of Risk Management and Employee Benefits, Lancaster Colony Corporation collaborated to provide insight into:

  • ERM and the Current Environment
  • Targeted Risk Management for the Current Political Climate
  • Leveraging Risks and Values
  • Investing in ERM: Motivating your Company

The session emphasized how our member companies are going about proactively using risk management tools and methodology to balance the risks related to Enterprise Risk Management in order to meet business goals and enhance business performance.

The session provided thought provoking ideas and advanced The Risk Institute’s unique role in uniting industry thought leaders, academics and highly respected practitioners in an ongoing dialog to advance the understanding and evolution of risk management. The Risk Institute’s conversation about risk management is open and collaborative with its relevance across all industries and its potential for competitiveness and growth.

 

 

Executive Education Session Next Week: ERM for Nonfinancial Institutions

Photo by Jay LaPrete
©2016 Jay LaPrete

In an environment of continuing economic uncertainty, attention to risk at the Enterprise Level is important. On May 23, 2017, The Risk Institute at The Ohio State University Fisher College of Business will be presenting, as part of its Executive Education series, the topic “Enterprise Risk Management (ERM) for Nonfinancial Institutions”.

Whether you are just getting started with ERM, or trying to manage the myriad of economic and business disruptions, or want to learn how you may improve your current process, this session is for you. The political and economic spheres have ushered in disruptions across the business environment landscape. There is no better time than the present to develop or enhance an enterprise risk management process.

The session will raise conversation with regard to the Enterprise Risk Management processes, but will also look at risk mitigants that businesses can take.  Our session will bring together thought leadership from academia, consulting and corporations to discuss the latest ideas and trends within ERM.

Session leaders, Professor Bernadette Minton, Chair, Fisher College of Business Department of Finance, The Ohio State University; Tammy Izzo, EY Central Region Government and Public Services Leader; Nick Kaufman, Director of Risk Management, Battelle Memorial Institute, Columbus, Ohio and; Ray Roshek, Director of Risk Management and Employee Benefits, Lancaster Colony Corporation will collaborate to provide insight into:

  • ERM and the Current Environment
  • Targeted Risk Management for the Current Political Climate
  • Leveraging Risks and Values
  • Investing in ERM: Motivating your Company

The session will emphasize how to proactively use risk management to balance the risks related to Enterprise Risk Management in order to meet business goals and enhance business performance.

The session will provide thought provoking ideas and advance The Risk Institute’s unique role in uniting industry thought leaders, academics and highly respected practitioners in an ongoing dialog to advance the understanding and evolution of risk management. The Risk Institute’s conversation about risk management is open and collaborative with its relevance across all industries and its potential for competitiveness and growth.

 

 

Absorptive Capacity: Achieving the Ultimate Balance for Effective Knowledge Utilization

Rapid changes in industry and technology are making it increasingly daunting for companies to develop new products internally. Often times, firms cannot generate the knowledge they need from internal sources alone. The essential question facing these firms is how can they most effectively assimilate new knowledge from external sources?

To answer this question we must first look at limits on absorptive capacity, the ability to absorb new knowledge, and how those limits can constrain the benefits of seeking alliances according to the study “Unpacking absorptive capacity: A study of Knowledge Utilization from Alliance Portfolios” by Jaideep Anand at The Ohio State University and Gurneeta Vasudeva at the University of Minnesota. The researchers studied data on alliances between firms engaged in fuel cell technology development. They studied the variations in alliance portfolios and the associated knowledge utilization outcomes among 120 publicly traded and private firms in 11 countries.

The study unpacks absorptive capacity into two parts: latitudinal and longitudinal absorptive capacity. Latitudinal absorptive capacity focuses on how companies process and use diverse knowledge, while longitudinal absorptive capacity focuses on distant or unfamiliar knowledge. Anand and Vasudeva found that a moderate burden on firms’ latitudinal absorptive capacity, corresponding to medium diversity in their portfolios, contributes to optimal knowledge utilization. However, increasing the demand on firms’ longitudinal absorptive capacity negatively affects this relationship.

Let’s take a closer look at latitudinal absorptive capacity and how it allows firms to use diverse knowledge to develop technological innovations. According to the study, an alliance between a company that concentrates on automotive technologies and a company that has technological capabilities in hydrogen conversion and storage technologies will aid the automotive company by providing a research alternative for automotive fuel technologies.

In contrast, longitudinal absorptive capacity is utilized by firms seeking knowledge distant from their primary technology. For example, an alliance between a firm that develops a phosphoric acid-based electrolyte and a firm that focuses on a hydrogen storage technology. This alliance provides the knowledge necessary to innovate and compete successfully outside of the firm’s area of expertise.

There are important trade-offs between the extent of learning related to the two types of absorptive capacity. The study found that knowledge utilization is optimized when the demands on firms’ latitudinal absorptive capacity are neither too high nor too low. It also finds that as firms venture into less familiar technological domains, their longitudinal absorptive capacity constraints inhibit knowledge utilization. Consequently, the level of latitudinal absorptive capacity constraint at which knowledge use peaks varies according to the demands on longitudinal absorptive capacity.

In conclusion, a firm’s knowledge can only be effectively expanded within the limits of their absorptive capacity. View the original research below to learn more of the implications of firms’ external knowledge and discover how external alliance portfolio-based capabilities can interact with firms’ absorptive capacity to determine their knowledge utilization.

Unpacking Absorptive Capacity: A study of Knowledge Utilization from Alliance Portfolios

The Risk Institute at The Ohio State University’s Fisher College of Business exists to bridge the gap between academia and corporate America. By combining the latest research with the real-world expertise of America’s most forward-thinking companies, the Risk Institute isn’t just reporting risk management’s current trends — it’s creating tomorrow’s best practices.

The Risk Institute Provides Research and Tools for OSU Student Project with Abbott Nutrition

During my junior year I was enrolled in the Healthcare Industry Cluster at the Fisher College of Business. As part of this program I was assigned to a group that would work on a semester long project with Abbott Nutrition. Our project scope was very broad. We were tasked with finding the best tools and practices in the healthcare industry for identifying, mitigating and communicating operational risk. My teammates, Alex and John, and I had very limited exposure to risk management. Alex was taking a Risk Management class during that semester, John was the risk officer for his fraternity, and I had done projects in sovereign risk management in a previous internship. We felt pretty under-qualified for the task at hand.

From the very beginning of this program our instructor told us that the network each of us had developed at Ohio State would be of value to the companies we worked with. With this in mind, we decided to begin our research at The Risk Institute at OSU. Our approach was simple, Abbott wanted us to find the best software that other companies were using to assess risk. So we would meet with The Risk Institute, ask them for some software recommendations and walk out with a list of tools to show our Abbott project leaders. We were surprised to find that conversations about culture would shape our research and project much more than conversations about technical tools. Phil and Denita, of The Risk Institute, shared with us the results of their annual survey and it was evident that integrated Risk Management had become a necessary tool for growth, not just a reactionary strategy. It was through our conversations with The Risk Institute that we first learned that an advanced risk software is ineffective if the inputs are flawed or shaped by a culture that doesn’t value risk management.

The expertise and vast amount of research housed within The Risk Institute allowed us to learn from other cases of poor and effective risk management cultures. It also validated our arguments when we went back to the Abbott team and told them that we should be focusing more on risk culture. It’s difficult to quantify cultural risk and easy to dismiss it as just “buzz words” so it was important to us that we had The Risk Institute’s research to back us up.

In the end of the semester we were able to offer Abbott a recommendation for a software that we thought would meet their desire for an automated, streamlined tool to analyze risk. We also focused on tools and strategies that would allow them to take a deeper look into aspects of their culture that were perhaps enabling risky behavior to go without mitigation. The Risk Institute directed us towards a group called the Barrett Values Centre who sells a product called the Cultural Values Assessment. This tool identifies gaps between employees’ personal values, their perceived company values, and their optimal company values. We recommend this to the Abbott team and they agreed that it seemed like a great tool to quantify their cultural risk. Driven by what we learned with The Risk Institute, we also encouraged them to engage in more cross-functional benchmarking across Abbott. Our project was within the Quality team at Abbott. At one of our presentations there was an employee from a different department. We were discussing a specific risk analysis tool that our team in Quality thought was brand new. However, according to that outsider who attended the meeting, that tool was already being used elsewhere in the company. Through this experience, we identified that Abbott has a somewhat “silo’ed” structured and could really benefit from more cross functional integration. We are confident that our partnership with The Risk Institute throughout that semester enabled us to elevate the discourse on cultural risk to the forefront of risk discussions at Abbott Nutrition.

The Risk Institute’s Business Simulation Competition for Students

 

I had the pleasure of participating in the recent RMA TLA Case simulation at Fisher College of Business. I was interested in competing in this event because I recently learned about the Risk Management Association (RMA) and heard positive things about the case competitions. The case simulation was for a DHL run Toys R Us distribution center. We were given a disaster scenario and our mission was to come up with a disaster recovery plan.

In preparation for the competition, we went on a distribution center tour with DHL. It was a great experience and the employees at DHL were passionate about helping the students learn. I had never been to a distribution center before and it was as if my operations management class came to life. Things that I had learned in class became something tangible versus words in a textbook.

The competition was challenging because l did not have any previous business logistics knowledge. As an Actuarial Science student, most of the logistics and operations items are not things I do on a daily basis. It was interesting to put on another hat and think in a different way. My group consisted of majors: logistics, accounting, industrial engineering, and actuarial science. Having a diverse group benefited us because we all brought a different perspective on each area of the competition and were able to come up with valid solutions.  We were able to ask the DHL professionals questions about their daily experiences and how things operate. We learned a lot of things that we could not learn in a classroom. Hands-on experience is often hard to get, but some of the most important information about operation comes from the people that live it every day.

Going into the presentation portion of the case competition, my group did not feel particularly confident about our recovery plan. However, after discussing everything for most of the day, our solution seemed simple to us.  Our main priority was to protect the workers and get the orders done in an efficient and timely manner. We established this first and used it to guide all of our choices, making the case easier.

I have always wanted to go into mitigating risk for an insurance company. After completing the case and attending other RMA events I have learned so much about multiple areas of risk. Risk is everywhere and it is an opportunity for advancement. If you can mitigate risk properly that can make all the difference, not only with money but also with the safety and health of workers and consumers. I also learned that risk is not always quantifiable. People cannot always be explained by numbers and in my opinion, it is one of the biggest factors of risk. My group focused heavily on this in our recovery plan, and I think it helped guide a lot of our choices. Overall, the case competition was a great academic experience.

I would like to thank DHL and Toys R Us for giving us an opportunity to participate in this competition, and for taking the time to come to Ohio State and share their knowledge.  The hands-on experience provided was worth more than any textbook.