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ITS 835 Chapters 35

Other Case Studies on ERM and Risk

ERM at Malaysia’s Media Company Astro Enterprise Risk Management

Professor Miguel Buleje

Overview • ERM at Malaysia’s Media Company Astro: Quickly

Implementing ERM and Using It to Assess the Risk- Adjusted Performance of a Portfolio of Acquired Foreign Companies

• Intro • Background • ERM at ASTRO • Evolution of ERM at AOL • Role of ERM in the Acquisition Process • Risk Profile: Risk Map & Action Plans • Investment Performance Dashboard

Introduction

• Case focus on the implementation of ERM to screen acquisition investments

• Astro Overseas Limited (AOL) is introduced, as the entity responsible for all international investments for Astro

• Describes how ERM is implemented in this set up by M&As by Astro • Explains how AOL is able to rationalize financial information and the

risk profile presented in a dashboard to help the board make better decision around risk and the overall ROI

Background • The Astro Group

• Established in 1996 • Leading integrated consumer media and entertainment group. • Operations in 4 key groups: pay TV, radio, publications and digital

media.

• Corporate Governance in Malaysia • Introduced first Corporate Governance code in 2000, and it was revised

in 2007.

• In 2011 its Security Commission established a Blueprint to corporate governance.

• Finally, in 2012 delivered and new Comply and Explain code.

Background • Corporate Governance in Malaysia (Cont.)

• Provided a sound framework to manage risks as follows • Sound framework of managed risks • Understand principal risks of all aspects of the business • Recognize business decisions involved taking of appropriate risks • Achieve balance between risks incurred and potential returns to

shareholders • Ensure systems that effectively monitor and manage risks • Company risk tolerance and tie to key business risks to safeguard

shareholders • Annual report disclosure of main risk management framework

and internal control

ERM at Astro • ERM framework within Astro

• Overseas Limited (AOL) responsible for all international investments • Adopted recommendations by the Malaysian Code on Corporate

Governance 2012

• Board implemented a Group Risk Management (GRM) framework as a integral part for biz operations and projects.

• GRM framework consistent w/ Committee of Sponsoring Organizations (COSO) enterprise risk management framework.

• Finally, Astro adopted ISO 31000 International Standard for risk management and the COSO process.

Evolution of ERM at AOL

• Migration of the ERM from: • Reactive: Disaster Recovery (What is something

happens?)

• Proactive: Business Continuity (When our biz is disrupted?) , to

• Adaptive: Enterprise Risk Management (How can we act for competitive gain?)

Role of ERM in the Acquisition Process

• ERM directly integrated into company acquisition processes • Pre-acquisition – Gain preliminary acquisition process • Monitor and Review phase – expands pre-acquisition

and coordination of strategic objectives • Post acquisition – execution of ERM into new company

and set up of exit/divestment strategy

Risk Profile: Risk Map & Action Plans

• Risk Map Characterized • Inherent / gross risk • Residual risk • Target risk

• Detailed of Risk Profile – Exhibit 35.11 • Risk identified: explanation/ consequences / owner • Causes • Controls • Action Plan

• Detailed Action Plan – Exhibit 35.12

Investment Performance Dashboard

• Investment Performance Dashboard • Investment Risk Analysis (Qualitative Assessment) • Financial Risk Analysis (Quantitative Assessment) • Total Investment Performance Score

• Help Board Make Investment Decision • Investment Performance Dashboard Comparison: Exhibit 35.15 • Investment Performance Dashboard – Quarterly Movements:

Exhibit 35.16 • Assisting the Board in Making Key Decision: Exhibit 35.17