A thorough risk manager can be a CFO’s best friend, as evidence suggests that most CFOs are finding themselves leading enterprise risk management (ERM) initiatives in their organizations.
Accounting for numerous business risk scenarios may come in handy when, say, a semiconductor manufacturer suddenly finds its industry in the midst of a trade war between global powers.
CFO Brew recently spoke with Michael Zuraw, senior director of global enterprise risk management at semiconductor manufacturer Onsemi about planning for the unlikely, incorporating risk management into strategy planning, and how he works with the CFO and finance team to identify and monitor risks.
This interview has been edited for length and clarity.
How much is Onsemi thinking about geopolitics and trade in its risk management planning?
It's an external risk that we've been looking at for years. This is not news to me or news to us. We've done emerging risk scenario planning sessions—we did some of these nine years ago, and at that time semiconductors were exempt from tariffs. We did a scenario [saying] what if they weren’t?...
The idea there was we had no control over it. We threw an idea onto the wall [asking], ‘What if? How would we prepare?’ In fact, it eventually happened and we were at least a few steps forward than maybe those scrambling in crisis, because we discussed it. The geopolitical risk certainly gets a lot more press, and it's a lot more volatile now than it was 10 years ago, but we've never not discussed it. We're a global company with a global footprint, with a global customer base, so while it might be more volatile and more discussed more recently, we've been talking about it for at least the 10 years I've been doing this, and I'm sure the company was talking about it before the program and before I created a framework for ERM here.
How does Onsemi incorporate risk management into its overall strategy planning?
If you're trying to get to a strategic objective, there is more than one way to get there. The question is, why do you choose the path you choose? To me, that’s all about decisionmaking and risk, because if there's only one path there'd be no choice to make. The idea here is there are lots of key assumptions that cause you to pick the strategic path you choose, because there are uncertainties and unknowns and there always will be, and I think one of the biggest risks in strategy is denying that—the idea that things will go the way I want them to go, and therefore this strategy is perfect. How we’ve started to integrate risk and ERM into strategy is to get folks to be more transparent and honest about [ask], ‘What are those assumptions?’
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This is not that people are subversive or devious…They're probably the best assumptions, but the fact is, they're not 100%. There is always uncertainty, and even the best assumption has some finite probability of being exactly wrong. [We say], let's talk about that, because that is where the risk lies, and then the question is, will there always be some finite probability of it being wrong? Can we reduce that probability? Could we have a contingency in place, a plan if it goes wrong? That's how we see the risk mitigation or the risk management within the strategy process.
How do you work with the CFO and the finance team in general on risk management?
We have an executive risk committee that my team and I meet with monthly, and that team includes Thad [Trent] the CFO, as well as the CEO, head of strategy, general counsel, [and] head of operations and manufacturing…to go through tracking the actual progress of those mitigation actions across our top tier risks. It’s not directly interacting with finance, but the CFO is part of that committee. Within that set of risks, there are some tier one risks in that discussion that are specifically around things within the finance group, to where Thad may be actually a sponsor and someone in finance may actually be an owner. And with those tier one risk owners and sponsors, we work with them continually on tracking their actions.