I am a “Penguin” runner. The word “penguin” has come to meanthose who run for the benefits and joys of movement, rather thanfor recognition or financial reward. We Penguins may be slow,we may be overweight—we even may waddle at times—but we finish therace. We accept the challenge of reaching our own potential, mileby mile.

But since we may not be natural athletes, the training processcan be painful, tedious, and exhausting. Tackling a racetakes a lot of motivation. Just getting up at 5:15 a.m. for a runtakes a strong drive, and it is usually not more than 10 minutesinto a run before I ask myself, “Why the heck am I doingthis?” To answer, it helps to have clear motives.

Developing an enterprise risk management (ERM) program is likerunning a long-distance race. Analyzing risks, setting controls,ensuring thorough communication and steadily monitoring progresstakes a lot of time and effort. At the finish line, the companyhopes to win confirmation that its risks are being appropriatelymonitored and managed. Leading the company's ERM team, there may be“natural athletes” like auditors, actuaries, and financial staffwho breeze easily through discussions of the most complicated ERMconcepts such as statistics, capital models and “stress tests.”

And then there are ERM penguins—the rest of the race team. Theseindividuals can be managers, compliance, underwriting, or claimsstaff who understand the basics of ERM, but who don't deal withrisks and controls frequently enough, or in enough detail, tocomplete a risk-related project painlessly.

Sometimes what they are asked to do is new, challenging, timeconsuming, and may require a lot of practice. This can beparticularly true for individuals at companies that are juststarting to develop an ERM program or are mid-course in theprocess. Getting to a final plan can truly be a marathon effort,and the question, “Why the heck am I doing this?” beginsto sound familiar.

Again, it helps to have clear motives. As a first step in acorporate ERM marathon, the whole team should be made aware of why,exactly, the company is adopting ERM. And they should be remindedperiodically. Some of the benefits are immediate to the company,while others may be more long-term. Each can provide an incentiveto employees to keep moving and stay the course.

The benefits of developing and maintaining a strong ERM processare similar to the many benefits of running. Through ERM, companieswant to accomplish the following six goals.

Comply with Doctor's Orders. Many people startrunning in order to lose weight, often because their doctors voicedserious concerns. Burning an average of 600 calories an hour,running is one of the most effective ways to lose dangerouspounds.

Similarly, state insurance regulators, evaluating the “health”or financial stability of their regulated entities, have seriousconcerns about the ability of insurers to cope with financialmarket shocks and future catastrophes. They fear insurers may becarrying too much risk, or are not controlling those riskssufficiently, and are requiring that companies adopt ERMpractices.

As of 2010, nearly all state financial examiners are required toreview insurers' risks and controls as part of company statutoryreviews. New York State is one of the first states to begin doingmore specialized examinations, reviewing formal ERM plans of selectcompanies in greater detail, and more states are likely tofollow.

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The National Association of Insurance Commissioners (NAIC) isnow debating whether to require insurers to submit a formal(annual) filing regarding their enterprise risks and controls – anOwn Risk and Solvency Assessment (ORSA). And the recent passage ofthe Dodd–Frank Wall Street Reform and Consumer Protection Act(Pub.L. 111-203, H.R. 4173) may mandate that public companies haverisk officers, committees, and managers who all drive ERMinitiatives. Thus in many cases, companies are starting ERMprograms because they have to — “doctor's orders.”

Be Generally Healthier. Physically, runningstrengthens your heart and lungs. Mentally, running is often usedto treat clinical depression and other psychological disorders.Runners are thus generally considered more “healthy” thannon-runners.

Likewise, companies with a solid ERM program are considered more“healthy” than companies that are not managing their risks well. Inaddition to state regulators, rating agencies such as Standard& Poor's have also begun to consider insurers' ERM programs aspart of the ratings review process.

While there is not yet a direct correlation between a company'srisk management and their rating, it is generally believed thatinsurers with comprehensive ERM programs will be perceived as wellmanaged, more financially secure, and as a result, will enjoystronger ratings. This can result in many benefits to the company:more customers, access to more capital, capital at a better rate,cheaper reinsurance, and a host of other financial and reputationalbenefits.

Prevent Muscle Loss. Regular, high-intensityexercise, like running, prevents muscle and bone loss, and has beenshown to promote the human growth hormone, which delays the effectsof aging.

Regular, thorough examination of risks and assignment ofappropriate controls prevents financial losses, and keeps thestrategic muscles of the company strong. ERM may promote new assetmanagement techniques and ideas, keeping a company flexible torespond quickly to changes in market conditions. Being agile onrisk principles and techniques may ultimately delay or mitigate theeffects of insurance or financial market deterioration.

Fight Disease. Research has shown that runningcan reduce the risk of heart attacks, stroke, and breast cancer,and may stave off the onset of osteoporosis, diabetes, andhypertension.

Proper risk management fights corporate disease: internal andexternal fraud and financial crime. When applied enterprise-wide,ERM can help prevent systemic failures in controls or operationsthat could lead to significant losses affecting multipledepartments or business units.

Manage Stress. Stress, whether sudden andacute, or nagging and chronic, can have disastrous effects on thebody. Running has the ability to alleviate stress in several ways.In addition to the release of endorphins, which create a sense ofeuphoria known as the “runner's high,” the act of runningallows the individual to focus on the task at hand, instead ofbeing worried or stressed about work, family, or other obstacles indaily life. Many runners say that having a specific time and place“just to think” is a key benefit of running.

Insurers also benefit from having a specific time and place“just to think” about risk. Setting aside specific time to considerrisk, engage in planning, and measure results can help ease bothindividual and corporate stress. For the individual, the ERMprocess often involves prioritizing competing issues and activitiesin managerial and staff workflow. Often, participants on the ERMteam are not ERM pros, and are juggling multiple responsibilities.Setting priorities based on relative risk to the company can helpstaff at all levels better manage their time.

For the company, failure to prioritize workflows may be aproblem, but insurers are also subject to significant externalstressors. Catastrophes, financial market shocks, large claims,mergers and acquisitions, and other external forces can result inboth sudden and long-term losses that drain company resources.Having an ERM process that considers “what if” scenarios and allowscompanies to plan in advance for such contingencies helps alleviateshocks and surprises. When something bad happens, if an ERM plan isin place, the company should be better prepared to meet the stressin stride.

Become More Efficient /Gain CompetitiveAdvantage. Both champion and Penguin runners enjoymonitoring their progress over time, and watch theirmile-per-minute or distance statistics improve. The more they run,the more efficient their bodies become, and in competition, steadytraining really shows. A few saved seconds can mean a win!

In the risk arena, ERM helps companies become more efficient. Inthe process of evaluating, monitoring, and mitigating risk, theymay uncover areas for operational or workflow improvements, savingstaff time or expense. Looking at risks across departments servesas “cross-training,” improving communication and coordinationamongst staff, which can lead to further opportunities forimprovement. Ultimately, a few points of improved underwriting orexpense loss ratio may be achieved, and in the insurance industry,a few points saved can mean a win with customers andshareholders.

Feel Confident. Runners become stronger witheach run, and finishing races builds confidence and self-esteem,helping runners face new challenges in other areas of life.

Companies with solid ERM processes have also achieved asignificant milestone. They are confident that they have theprocesses and workflows to manage new goals, targets, or challengesin a disciplined, well-reasoned way. They are less afraid ofentering into new lines of businesses, or entertaining newventures, as they have had past successes weighing all pros, cons,and operational details from a risk-focused perspective.

Enjoy these benefits of running, and remember them when you needsome incentives to get moving on the ERM course. Keep on pace toachieve lasting results.