Strategic Risk Management

at GM: Changing the Risk Paradigm

Angela Hoon ,

Executive Director

Strategic Risk

Management

General Motors

Company

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AG

EN

DA

• WHY IS RISK MANAGEMENT KEY

TO GM’S BEHAVIORS AND

CULTURE?

• WHAT ENABLED AN INNOVATIVE

APPROACH?

• HOW IS GM SHIFTING THE RISK

PARADIGM?

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WHY IS RISK MANAGEMENT KEY TO GM’S BEHAVIORS AND CULTURE?

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RISK IS INEVITABLE, MANAGING IT IS NOT

Facebook COO, Sheryl Sandberg at 2018 MIT Commencement held June 8th, 2018

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A WAKE-UP CALL ON ETHICS, SAFETY & RISK

• In 2014, GM initiated a massive recall to address an ignition switch issue that was creating a safety hazard

• The result of the ignition switch failure and subsequent investigation included:

• Harm to customers

• Significant employee discipline

• Legal actions

• Significant expenses from Recalls, Rework, Penalties, and Damages

• Loss of company reputation 5

CHANGES GM MADE – TOGETHER WE DRIVE THE RIGHT BEHAVIORS AND CULTURE

Ethics & Compliance

• Revised Code of Conduct – Winning with Integrity

• New Compliance Officer• Channels for Escalation –

Speak up for Safety

Strategic Risk

• Board Risk Committee (established Oct. 2014)

• New Enterprise Risk Leader in May 2015

• Focus on building a culture of risk by integrating risk into the business

Vehicle Safety

• New Vehicle Safety Leader in 2014

• New Safety Organization with focus on data analytics

• Cross-functional safety principles

• Monitoring and assurance on controls

GM Values & Behaviors

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GM’S VISION FOR RISK MANAGEMENT

Focus on strategic and

cross-functional

analysis of risk and see

around corners

Embed a risk-aware culture

across the enterprise,

including open, transparent dialog of risk

Ensure consideration

of risk and opportunities in decision-

making

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WHAT ENABLED AN INNOVATIVE APPROACH?

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Business Plans& Initiatives

STRATEGIC RISK MANAGEMENT AT GM

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Disruptions& Trends

Business Model& Structure

External Players& Events

SRM PROGRAM FOCUS

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2.

3.

ENTERPRISE RISK &

REPORTING

DECISION SUPPORT &

RISK ANALYSIS

INTEGRATION OF RISK

MANAGEMENT

FOCUS ON ENTERPRISE RISK AND REPORTING

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A view of risk across the organization

RISK GOVERNANCE FACILITATED THROUGH TOP-DOWN AND BOTTOM-UP COMMUNICATION STRUCTURE

Risk Committee of the Board

Senior Leadership Team

Risk Advisory Council

Risk Officers

Management

Communicate risk information real time

Provide oversight over GM’s portfolio of risks

Champion mitigation and monitoring efforts

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InterconnectedRisk

Blind spot

What are theHidden Risks & Opportunities?

What are the Risk Clusters to prioritize?

What are the Likely Player Strategies?

What should Our Strategy be and

is it robust?

What Could Go Wrong with our

strategy?

Social MediaWhat do the

Monitor Signals indicate?

RISK ANALYSIS AND DECISION SUPPORT

Wargaming

Game Theory

Pre-Mortem

Strategy TableWhat are our Guiding Principles to achieve a vision?

Scenario Planning

How might Trends & Risks play out?

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CHANGE TO A NETWORK VS INDIVIDUAL VIEW OF RISKP

roba

bili

ty

Impact

Risk

#1Risk

#4

Risk

#6

Risk

#9

Risk

#2

Risk

#8

Risk

#5

Risk

#7

Risk

#3

Traditional Risk Model

Risks Get attention!

Risks Get acknowledged

Risks Get a nod

But is that right?

What if these are not isolated risks?

Network Risk Model

Risk

#7

Risk

#2

Risk

#8

Risk

#4

Risk

#1

Risk

#6

Risk

#9

Risk

#5

Risk

#3CausalRisks

EffectRisks

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APPROACH RISK FROM A DIFFERENT ANGLE

DECISION SUPPORT TECHNIQUES

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Who is involved?

What can they do?

What do they want?

How will they act?

What should GM do?

Preferences ProposalAnalysisPlayers Options

• Game Theory and Wargaming are GM’s most commonly used decision support tools

• Expertise in applying these techniques brings the Risk Management team to the table for a variety of strategic decisions, including: • M&A discussions• Labor/ Supplier/ Partner negotiations • Regulatory change

THE DIFFERENCE BETWEEN GAME THEORY AND WAR GAMING

Blindspot

Workshop

Social Media

Analysis

Other player(s) decisions are important but

independent of GM

Other player(s) decisions important and affected by GM

actions

Game Theory War Gaming

HOW IS GM SHIFTING THE RISK PARADIGM?

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GM CONFIDENTIALStrategic Risk Management

ENGAGE CROSS FUNCTIONAL TEAMS DIFFERENTLY

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GM CONFIDENTIALStrategic Risk Management

ADAPT RISK TO THE BUSINESS NOT BUSINESS TO RISK

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Eliminate Risk Jargon with the

Business

Find Management Forums where Risk discussion can be Included Naturally

Integrate withthe Business vs. Being an Add-on

Link Risk Analysis to Business

Challenges, Strategy and Decisions that

are Top Priority

These efforts help cascade risk throughout GM, spreading a risk culture across the organization.

Business Acumen

Risk management is:

• a thought process or business technique

• that creates value for the organization

• through enablingleadership and cross-functional teams

• to analyze complex business challenges

• and make risk informed business decisions.

Critical Thinking and Decision

Support

Ability to Partner and Influence

Risk Knowledge

HOW GM IS SHIFTING THE PARADIGM ON RISK MANAGEMENT

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