european journal of social sciences issn: 1450-2267 - EuroJournals

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European Journal of Social Sciences – Volume 5, Number 3 (2007) 3.2. Best Practice Framework to ERM A best practice framework sets out the areas where best practices would be expected to be of common interest to a variety of organizations. This framework was developed jointly with KPMG to be used as well in its international study. The basic assumption is that an organization invests resources in managing its risks, both strategic and operational, in order to achieve anticipated benefits. These benefits, which are often defined as objectives for managing risk could be any combination of: • Communication for commitment; • Enhancement of stakeholder value, achievement of corporate objectives; • Measurement for improved management; • Support for effective accountability and governance; • Strengthening of planning and decision processes (synergy, communications, etc.); • Measurable returns on investments; and, • Increased confidence of stakeholders. The authors continued their research of current trends and best practices in ERM with case studies of several organizations: Hydro-Quebec, Bradford & Bingley Building Society, Australian Communications Company, Clarica Life Insurance, KeyCorp, Infineon Technologies AG, Holcim Ltd., and Wal-Mart Stores, Inc. Although these organizations have much in common, ranging from corporate philosophy to corporate structure, the level of success with ERM implementation is varied. Interviews with leading organizations in ERM and literature reviews helped the authors identify several key success factors for ERM. According to the results of this research, ERM efforts are more successful when there is strong and visible support from senior management and dedicated crossfunctional staff to drive ERM implementation and push it into operation. Most executives interviewed stressed the importance of linking ERM objectives to the key financial and strategic objectives of the organization and to the business-planning process. In addition, those interviewed suggested introducing ERM as an enhancement to already entrenched and well-accepted processes, rather than as a new stand-alone procedure, and then proceeding incrementally to avoid great internal resistance. 4. Determining of ERM Best Practice Criterias Many book, research and reports published about ERM concept and its conceptual framework. Also, many survey accomplished about various sectors and industries. But, any study doesn’t exist to air transportation sector and airports. For this reason, this article will help and support related to newly raising and growing ERM efforts in the airport business across the world. In this study, best practices criterias are determined by these ERM best practice surveys, guidelines, frameworks, case studies and ERM implementation studies are analyzed. They are considered in the 3 main gorups. They are; i. Strategic best practice criterias • Developing and Establish to ERM vision, mission and strategy • Integration of ERM into other management practices and management functions • Creating and Promoting an ERM culture and common language Developing organizational ERM policy and prosedures • Achievement to Corporate Risk Optimization ii. Operational best practice criterias • Determining corporate risk appetite and tolerance line; creating corporate risk profile • Establishing open communication and feedback systems • Establish ERM information system • Setting up ERM function and committee • Setting Up an ERM framework for all aspects of corporate-based risks • Overall enterprise risk assessment and analysis, enterprise risk mapping and prioritization 66
European Journal of Social Sciences – Volume 5, Number 3 (2007) iii. Financial best practice criterias • Use and supply of outsources about ERM • Supply to Modeling, tools and techniques • Resource allocation to ERM efforts, requirements and infrastructure • Establish ERM Framework • Providing resource to sustainability of the ERM development and continuity These criterias has qualitative and quantitative characteristic. Selection a best ERM operator in the airport business is considered as the multiple criteria decision-making (MCDM) problem. So, ANP based apporach is used in this study. In order to implement the ERM successfully, here raises a critical issue of select a best practice criterias of ERM before that ERM implementation. However, although numerous creditable works are devoted to the study of how to build a best ERM practice, few of those have provided methods which can systematically implementation of the ERM strategy and framework. When companies need to achieve best ERM strategy and its implementation, they usually face to consider a large number of complex factors. Typically, the multiple criteria decision-making (MCDM) problem is a decision-making problem required to evaluate several alternatives involved in a set of evaluation criteria. Hence, selecting a best ERM operator is a kind of MCDM problem, it is better to employ MCDM methods for reaching an effective problem-solving. Since the ANP has advantages (see appendix), in this paper, I develop an effective method based on the ANP to help companies that need to understanding of best ERM practice concepts and its criterias. 5. Current ERM Practice in Airport Business: Fraport A.G. and TAV Airport Holding Co. ERM differs from traditional risk management approaches in terms of focus, objective, scope, emphasis and application. It aligns strategy, people, processes, technology and knowledge. The emphasis is on strategy, and the application is enterprise-wide. ERM provides a company with the process it needs to become more anticipatory and effective at evaluating, embracing and managing the uncertainties it faces as it creates sustainable value for stakeholders. It helps an organization manage its risks to protect and enhance enterprise value in three ways. First, it helps to establish sustainable competitive advantage. Second, it optimizes the cost of managing risk. Third, it helps management improve business performance. These contributions redefine the value proposition of risk management to a business. One way to think about the contribution of ERM to the success of a business is taking a value dynamics approach. Just as potential future events can affect the value of tangible physical and financial assets, so also can they affect the value of key intangible assets. This is the essence of what ERM contributes to the organization: the elevation of risk management to a strategic level by broadening the application and focus of the risk management process to all sources of value, not just physical and financial ones (Deloach, 2005). Commercialization (and in many cases privatization) is becoming a general trend in the airport industry in the sense that airports are increasingly run as commercial business and not as public service organizations. This new scenario has brought opportunities for airport competition and so for further efficiency gains. So, ERM is became critical practice in the airport business. In this section, airport ERM practices reviewed based on TAV and Fraport A.G. cases since they are only current samples related to the ERM implementation to airport business in the across the world. 5.1. Fraport ERM Practice Fraport AG Frankfurt Airport Services Worldwide (formerly called Flughafen Frankfurt/Main AG) is a leading player in the global airport industry. Following its initial public offering (IPO) in June 2001, Fraport AG has become the world’s second largest listed airport company by revenues. Fraport trades 67
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european journal of social sciences issn: 1450-2267 - EuroJournals

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