Chris Duncan

Standard & Poor’s adoption of enterprise risk management practices into the credit ratings of non-financial companies is taking up more of Chris Duncan’s time.

Mr. Duncan, the chief financial and operating officer of the Duluth-based McCart Group, told GlobalAtlanta that he is now spending as much as 30 to 40 percent of his time consulting on the S&P’s newly expanded criteria for rating the credit worthiness of companies.

Public as well as privately held companies are increasingly aware of the importance of enterprise risk management  "as a needed management skill set to survive in today's global risk world," he said.

S&P, a division of McGraw-Hill Cos., instituted the change in May for inclusion in company credit ratings published in 2009. The McCart Group is a sponsor of GlobalAtlanta.

Companies with a firm handle on their risk management practices are less threatened by cash flow interruptions “from bad things happening to the business,” according to Mr. Duncan, whose firm is a privately held risk management and commercial insurance brokerage group.

He takes a down-to-earth approach to the newly minted ERM practices, saying “CFOs want to know where the snakes are in the grass so they will be less likely to step on them.”

Companies need to develop “organizational antibodies” to prevent serious consequences of a threat to their well-being, he added, recognizing that the S&P’s initiative considers the scope of risk management to have expanded.

While in the past companies primarily guarded against hazard risks such as fires, storms, employee injuries and customer claims and lawsuits, they have new concerns to their reputations, supply chain disruptions and corporate culture failures, including governance and human resource issues.

“ERM expands the hazard risk focus to include ‘company killer’ risk of any sort,” he said. He cited the example of a restaurant that now has to be prepared for traditional threats to routine hazards such as windstorms and downturns in the economy to new ones such as food safety issues including mad cow disease or avian flu.

The global activity of firms increases the number of risks that a company faces, he added, especially the vulnerability of its supply chain and the proliferation of instantaneous news and information across the globe that can aggravate a problem almost instantaneously.

At the same time, he advises that executives not try to put in place a comprehensive plan at once. “Don’t boil the ocean,” he said. “ERM is about progress towards understanding and mitigating critical risks, not perfection of understanding and eliminating all risks.”

The McCart Group offers ERM program evaluation services to prepare for S&P inquiries as well as a program’s development and implementation, he said.

Below is a GlobalAtlanta Q&A with Mr. Duncan: