Enterprise Risk Management at Mars

Mars, Incorporated successfully embedded Enterprise Risk Management (ERM) into their business model and not only did other companies begin to adopt their process, but Mars also received the Corporate Executive Board’s “Force of Ideas Award” for ERM (Fraser, Simkins, & Narvaez, 2015, p. 57). Mars’ ERM program had several key factors that demonstrated its success.

One key factor for success was that Mars aligned the program with their approved principles (Fraser et al., 2015, p. 57). A second key factor was that Mars focused on achieving their operational and strategic objectives, while allowing associates responsible for compliance to use the necessary tools to succeed (Fraser et al., 2015, p. 57). Thirdly, Mars focused on evolution, instead of revolution, to perform a continuous improvement process (Fraser et al., 2015, p. 57). The fourth key factor for success was that Mars utilized being flexible by assisting units in developing the workshops and updating processes that best met their needs, as opposed to being rigid (Fraser et al., 2015, p. 57).

The fifth key factor for success was that their process proved to be a good identifier of talent and an opportunity for associate development (Fraser et al., 2015, p. 57). The sixth key factor was that the ERM team never over promised what it could deliver, and instead set realistic objectives, meanwhile obtaining support from senior management (Fraser et al., 2015, p. 57). The seventh key factor for success was that the ERM team engaged and conducted in periodic surveys of the business units, the Mars’ management team, and the Mars’ board’s advisers (Fraser et al., 2015, p. 57).

Mars, Incorporated, is a global company with several major brands like M&M’s, Snickers, Orbit Gum, and Skittles. They also make Uncle Ben’s rice, several food nutrition products and personalized nutrition business, Banfield Animal Hospitals, and several pet foods (Made by Mars | Mars, Incorporated, n.d., para. 1-4). Mars used a quarterly review and report as an approach to update their risk dashboard (Fraser et al., 2015, p. 48-49). One improvement might be to look monthly at three specific indicators that Mars would ordinarily look at quarterly. These could be one representative risk area, one unlikely-but-dangerous risk area and one risk area outside to the company.

Mars had a risk profile scoring system that used five colors to represent “increased probability of achievement and/or increase the level of management effectiveness.” The colors ranged from green, blue, yellow, orange, and red (Fraser et al., 2015, p. 47). Mars developed a summary report that listed risk areas in order of priority and gathered their data by geographic region. The report listed each business initiative, defined it, and then reported on that initiative’s risk profile (Fraser et al., 2015, p. 47). Another Improvement might be to have immediate reporting to upper-level management of any enterprise issue categorized as red.

Mars used workshops to develop these reports. During the case study, they noticed that some people interpreted the questions differently, creating different frames of reference to score mostly the same thing differently from each other. Mars’ solution was to change the questions on the survey to very specific terminology (Fraser et al., 2015, p. 49-50). One improvement might be to publicize this report of measurable objectives and publish it for all Mars’ associates to read. That way, every associate at every level will know what management is looking at and have an idea what their personal or business unit goals should be. Also, improvements like this would increase personal responsibility and give a greater sense of transparency to the sharing of data and give each person and team a roadmap for advancement.

Mars also changed the way they design their workshops. They standardized their workshop planning process and gave the planning job to the business units which freed up senior management, who were the workshop facilitators, from doing the planning. Mars developed a PowerPoint with a standardized process for the units to use when planning. This helped standardize the way risk data was gathered, analyzed and presented to management (Fraser et al., 2015, p. 50-51). Mars made technology improvements as well. They began using Excel tools to organize and evaluate information. Using workshops and Excel tools helped standardize the evaluation of risk and made the process more efficient. Using Excel made it easier for participants and operators to adapt their Excel templates during the workshops as they were evaluating them (Fraser et al., 2015, p. 51). To improve transparency across all levels, these Excel tools could be made available at all levels for comments or suggestions.

Another area for better management involved Mars’ use of software to aggregate data. The problem Mars had was dependence on back-office support to run the programs that had the data. Losing the back-office support cost them all their data (Fraser et al., 2015, p. 53-54). An improvement would be to organize the data in a format that everyone can use and as protected as possible from software changes or loss of associates.

Another area of improvement Mars might have is in their Workshop scheduling. Mars found that operation planning in the morning and strategic planning in afternoons did not work because people were fatigued in the afternoons (Fraser et al., 2015, p. 50-51). An idea might be to hold workshop meetings over two to three days. They could have operational planning on the first day. Then begin the second day with a quick review of the first day and start strategic planning right afterward. A third morning could be used to organize the report and resolve any issues from the first two days planning. A lot of times people do not really have any comments to make until after they left the meetings. Spreading it over three days gives participants the chance to bring back their ideas.

The Demonstration of ERM Program as an Effective Risk Management

Mars was able to implement a successful ERM program. Although they were not able to achieve buy-in the first time they attempted to promote risk management, their initial failure was needed to see the issues within the ERM program. The “general consensus that enterprise risk management’s (ERM) popularity has resulted from a response to pressure on organizations to holistically manage risk. Multiple frameworks for implementation of ERM contribute to…the essential components of ERM” (Lundqvist, 2014, p. 393). With this, Mars was able to identify that the original ERM plan was too complicated and most likely would not have succeeded. When attempting to implement ERM the second time, they were able to create a much simpler solution that focused on cultural risk buy-in and within three workshops, a global rollout of the ERM program was achieved.

Due to Mars’ ERM program evolving in an environment that had cultural push back, the ERM team had to constantly adapt and take feedback to improve the program. One simple change that occurred from feedback was using the term “Treatment” instead of “Mitigation” and using changes to how the material was presented, such as using GM’s to refrain from commenting until the end of the workshops (Fraser et al., 2015, p. 43-44). With this, they were able to control the atmosphere of the workshop to promote buy-in and fine tune the ERM program to make it work for the company. These techniques and reactions to the feedback they received helped develop a more agile ERM program and ultimately helped make further workshops efficient and implement their global ERM strategy.

The ERM Program at Mars and Publicly Traded Corporation

Although not all organizations run the same way, the ERM program at Mars would work for a publicly traded corporation of similar size. By making discoveries such as the “known unknowns” in the global finance team’s workshop, it is found to be a key to a business’s success (Fraser et al., 2015, p. 40). By identifying the unknown, this could be a major key to successful workshops because it helps evaluate the risks with an organization’s strategies. A publicly traded corporation of similar size could truly follow Mars’ development of an ERM program by holding monthly meetings and understanding that ERM is an “evolutionary process” (Fraser et al., 2015, p. 41). Workshops within the ERM process are beneficial to organizations who are not familiar with direct risk reports because it helps their members gain an understanding of issues that challenge the business’ structure.

Organizations of similar size to Mars must understand the major moralities for the design of an ERM progress. These include principles of creation of value, the influence of the company’s unique strengths, working with existing organizational structure, understanding that risks are opportunities, and inspiring alignment and accountability (Fraser et al., 2015, p. 42). If organizations had similar needs as Mars, they would be able to work with the ERM program. By acknowledging the senior management’s point of view of what is needed, it would provide the keystone of the ERM development. During Mars’ ERM program, the development of the process gave business units a way to take on more risk to improve their opportunities and capabilities for organizational growth. Businesses who are willing to try new things could make improvements to the ERM process resulted from requests or even suggestions from department members.

Alignment and Accountability Among Management

Alignment and accountability are the key elements that are critical for a management team to be successful in order to meet their company’s objectives and goals. Accountability, alignment and honesty are necessary for any company team that may be set up for different reasons. Alignment is important as it helps the management team have a better understanding of company wide objectives and goals. This must be clearly understood by the entire team so they can relay the information to others (Fraser et al., 2015, p. 42).

Among the management team. accountability is important as it has been proven to be an effective way to avoid mistakes. Accountability also improves productivity and overall performance of the team. For accountability to be successful, everyone has to work as a team player. Typically, when individuals of a team are expected to do certain parts of the project, the team member will feel a greater accountability for their part. If one member is lacking in their part, it may cause delays for other team members and jeopardize a company’s objectives and goals.

References

• Fraser, J., Simkins, B. J., & Narvaez, K. (2015). Implementing enterprise risk management: Case studies and best practices. Hoboken: Wiley
• Lundqvist, S. A. (2014). An Exploratory Study of Enterprise Risk Management: Pillars of ERM. Journal of Accounting, Auditing & Finance, 29(3), 393–429. https://doi-org.db24.linccweb.org/10.1177/0148558X14535780
• Made by Mars | Mars, Incorporated. (n.d.). Retrieved June 25, 2019, from https://www.mars.com/made-by-mars