AYSE KUCUK YILMAZ
1
COVER PAGE
Enterprise Risk Management Implementation Model for Airports in
Turkey
Ayse KUCUK YILMAZ*
PhD Candidate
Anadolu University. Iki Eylul Campus. Scholl of Civil Aviation
26470 Eskisehir-Turkey
e-mail: akucukyilmaz@anadolu.edu.tr
GSM: +90535 462 55 90 Office Phone: +90 222 335 0580-6812
Corresponding Author: Ayse KUCUK YILMAZ
Ayse Kucuk Yilmaz. School of Civil Aviation, Anadolu University, Turkey in 2001,
Master, Anadolu University Social Science Institute, Civil Aviation Management, 2003. She
is an aircraft technician and PhD candidate at Anadolu University-Social Science InstituteCivil Aviation Management Department in Eskisehir, Turkey. She is finished her doctorate
dissertation in December 2006 that it is in the approval process.
AYSE KUCUK YILMAZ
2
Enterprise Risk Management Implementation Model for Airports in
Turkey
Ayse KUCUK YILMAZ*
PhD Candidate
Anadolu University. Iki Eylul Campus. Scholl of Civil Aviation
26470 Eskisehir-Turkey
e-mail: akucukyilmaz@anadolu.edu.tr
GSM: +90535 462 55 90 Office Phone: +90 222 335 0580-6812
Abstract
Enterprise risk management (ERM) is important application in the airports as integral part of
the air transportation system. The study is claim that airport management systems must be
includes an implementation of ERM. The study is dealing solving with “What kind of ERM
model should develop and apply to airports in Turkey” main problem. ERM implementation
is not “one-size-fits-all” kind approach to any organizations. So, every organization should
develop their ERM implementation model and its process. This paper aimed to developing an
ERM framework model for airports in Turkey. The model is developed by collaborative study
with DHMI (Turkey Governmental Authority to airport), TAV Airport Holding Co., Celebi
Holding and Bayindir Holding., which they are leadership in the airport operators in the
Turkey. The verbal model is used in the developing of the ERM model. Current ERM
applications are analyzed ERM guidelines/frameworks are reviewed. Current ERM models
are re-interpreted and shaping for airports. Also this new model is clings to current ERM
framework by publishes COSO. In the study, Questionnaire is applied and face-to-face
interviews are made with airport managers to developing the effective and applicable ERM
model to airport business. The Istanbul-Atatürk International Airport in Turkey is selected a
sample to ERM model as real world situation that it is prior international airport in the
Turkey.
Index Terms- Air Transportation, Airport, Enterprise Risk Management implementation
model.

*Correcponding Author: Ayse KUCUK YILMAZ.
E-mail: akucukyilmaz@anadolu.edu.tr; GSM: +90 4625590
AYSE KUCUK YILMAZ
3
1. Introduction
is
Airports cannot be seen as just another industry.
programs are required simply to keep pace
However, due to fundamental changes in the
with the projected growth in air travel
market and competitive landscape, pressure and
demand, while governments are reducing
risks on airports will increase significantly.
their funding for airport projects. These
Airports have to move towards transparent
factors are literally changing the face of the
management structures with an explicit focus on
world’s airports (Feldman, 1998). Also these
the core business and clear accountability. They
changes are increase to need for ERM
are present of importance and necessity of ERM
implementation in the airport business.
implementation at airport. Basic pressure and
risks
based
on
following factors
(Mercer
increasing.
Tremendous
investment
Uncertainty and risks are increasing due to
these developments and changes. ERM
Management Consulting, 2005):
implementation is essential for sustainable
-
Regulatory changes / airport liberalization
growth and success of airport business. In the
-
Significant capital expenditure required to
air transportation sector, airports, air traffic
cope with air traffic growth
control facilities, and government airlines
-
Growing competition between airports
become more commercial-oriented and have
-
Airlines increasing price pressure on airports
been partially or fully privatized in many
-
Consolidation
cases.
of
network
carriers
and
aggressive growth of low cost airlines
-
The increasing competition and changes
Rising profit expectations of shareholders/
across sectors and the rise of the low-fare
privatization
carrier are amongst the most significant
Airports represent some of the most diverse and
complex
facilities
world.
many years. These changes and developments
Essentially an airport is itself a small city with all
in customer base have significant facilities
of the associated functions from receiving aircraft
implications as identified by Pitt and Brown
to providing chapels. The skills and knowledge
(Pitt, 2001). The organizational skills required
required of the facilities manager are diverse and
of the strategic facilities manager are severely
in general represent space planning logistics and
tested by the diverse nature of the responses
process mapping which are all core ingredients of
required in order to satisfy both customer
the
(airline) and employer (airport owner) (Pitt,
contemporary
throughout
facilities
the
changes to affect the aviation industry in
management
discipline (Pitt and Brown, 2000).
The
airport
business
experiencing
The objective of this study is to developing
unprecedented change. The world’s airlines are
of ERM Model to the Istanbul-Atatürk
undergoing
and
International Airport in Turkey. Collaborative
consolidation, and competition between airports
study is carried out with airport’s executives
global
is
2001).
liberalization
AYSE KUCUK YILMAZ
4
during the application of ERM model. The model
Enterprise Risk Management: Frameworks,
emphasizes that ERM is an integral part of the
Elements,
and
management process. Allocation and use of
overview
of
limited resources through an effective and
frameworks and will
systematic ERM implementation effort are
accountants
critical in Turkey as well as other developing
responsibilities in ERM projects.
countries. Implementation of ERM model can
b. Enterprise
able to provide reasonable assurance to managing
Implications, Benefits and Process (2006)
risks of airport business.
publishes by General Re. According to the
Integration
the
ERM
understand
Risk
provide
process
help
their
an
and
management
roles
and
Management:
It’s
The paper organized into 4 sections and
resource, ERM has come out from behind the
begins with the ERM and related researches.
curtain. All insurers, to some degree, will
Problem and Proposed ERM Model are presents
have to begin assessing their risk management
in Section 3. Results are explained in Section 4
capabilities and processes. ERM is a good
and concluding remarks is given this last section.
business practice and companies can turn the
new ERM standards set by rating agencies
2. The ERM and related researches
ERM
literature
Many
into a competitive advantage. If companies
organizations is publishes various studies about
look beyond "Checking the box" for meeting
ERM. In this study, source samples about ERM
rating agency criteria, the real value of ERM
given as following;
can be realized and result in more profitable
a. COSO
is
business practices down the road. This paper
Integrated Framework: The framework defines
describes the ERM process, its benefits and
essential ERM components, discusses key ERM
implication. We will then examine how the
principles and concepts, suggests a common
rating agencies have taken up ERM as an
ERM language, and provides clear direction and
important aspect of the rating process.
guidance for ERM. Engaged by COSO to lead the
c. The
study, PricewaterhouseCoopers was assisted by
Management is publishes by Virchow, Krause
an advisory council composed of representatives
& Company. According to the study “ERM
from
organizations.
can be tailored to any utility's operations. In
Enterprise Risk Management: Frameworks,
today's utility environment operating without
Elements, and Integration (2006): Statements on
ERM principles in place is taking a gamble
Management Accounting (SMAs) present the
that nothing will go wrong, or that you will be
views of IMA regarding management accounting
successfully reactive to factors impacting
and financial management issues. In their
your business. You wouldn't run your
development, the Statements are subjected to a
personal household that way, would you?
rigorous exposure process. The 2006 SMA on
This paper explains the journey into the
-
five
Risk
context.
Management-
the
Enterprise
vast
COSO
Principles
of
Enterprise
Risk
AYSE KUCUK YILMAZ
5
intricacies of understanding and implementing an
guide doesn’t exist about airport ERM. So,
ERM program at your utility or organization. To
the study is aiming to contribute for this field.
fully understand the mindset and process behind
3.Problem and Proposed ERM Model
ERM, we must first discuss the founding
The study is dealing solving with “What
principles of ERM and its application in various
kind of ERM model should develop to
industries”.
airports in Turkey” main problem. ERM
d. Enterprise Risk Management: Theory And
implementation is not “one-size-fits-all” kind
Practice (2006) is publishes by Ohio University.
approach to any organizations. So, every
In this paper, they explain how ERM creates
organization should develop their ERM
value for shareholders. In contrast to the existing
implementation model and its process. This
finance
paper
literature,
we
emphasize
the
aimed
to
developing
an
ERM
organizational benefits of risk management. They
framework model for airports in Turkey. The
show how a firm should choose its risk appetite
model is developed by collaborative study
and measure risk when implementing enterprise
with DHMI (Turkey Governmental Authority
risk management. They also provide an extensive
to airport), TAV Airport Holding Co., Celebi
guide to the implementation issues faced by firms
Holding and Bayindir Holding., which they
that implement ERM.
are leadership as the airport operators in the
e. Enterprise
Specialty
Turkey. The verbal model is used in the
Guide (2006) is publishes by Society of
developing of the ERM model. For this aim,
Actuaries.
has
Current ERM applications are analyzed and
undertaken an initiative to educate the public, and
ERM guidelines/frameworks are reviewed.
especially industry leaders who are in need of
Current ERM models are re-interpreted and
guidance in matters involving risk assessment
shaping for airports. Also this new model is
and control, about actuaries' unique set of skills
clings
that are particularly relevant in today's climate of
publishes COSO.
The
Risk
Management:
Society
of
Actuaries
to
current
ERM
framework
by
risk quantification, classification and mitigation.
In the study, Questionnaire is applied and
This Specialty Guide on ERM is a work in
face-to-face interviews are made with airport
progress, begun in the spring of 2004 by
managers to developing the effective and
members of the ERM Working Group of the
applicable ERM model to airport business.
Society of Actuaries Risk Management Section to
The Istanbul-Atatürk International Airport in
serve as a fundamental resource for a basic
Turkey is selected a sample to ERM model as
understanding of ERM, as well as a guide to
real
further study of the subject.
international airport in the Turkey.
Many resources, guidelines and surveys are
publishes in ERM literature. But any research or
world
situation
that
it
is
prior
AYSE KUCUK YILMAZ
6
As illustrated in figure-1., new ERM model is
-
Analysis of organizational capabilities,
consist to 32 steps: 6 main steps and its sub-step.
abilities according to the desired ERM
They are listed following;
model and its implementation efforts.
i.
Analysis of internal environment and
-
Training and education about fundamental
determination of requirements of ERM
ERM concepts, conceptual framework,
-
Declaration of organizational objectives and
process and practice steps for managers
aims
and related other staff in airports.
-
Determination
of
external
and
internal
-
pressures (with their risks)
Building of organizational risk profile and
determination of risk tolerance line.
-
Analysis of internal audit structure
iii.
-
Analysis of information systems
committee
-
Determination of organizational resource and
a. establish a suitable ERM function
their allocation
b.Place of the ERM Committee (CEO, CRO,
Determination of organizational strategy and
CFO, CIO, etc.) in organization chart.
its relationship with ERM
iv.
Supporting of ERM by the current managerial
and determination of ERM framework
approaches,
-
-
-
applications
and
functions:
strategic management and planning, corporate
governance,
line
management,
portfolio
Establish of ERM strategy; Establish of
of
ERM
function
and
Establish of ERM information system
Establish suitable ERMIS (Enterprise
Risk Management Information System)
-
management, value management, etc.
ii.
Establish
Establish Documentation procedures and
format
-
Establish reporting format and line (top-
substructure requirements about ERM
down, across, down to top, external and
-
internal parties)
Definition of organizational ERM vision,
mission and strategy that they are guide and
-
-
the
best
ERM
framework to airport by analysis other
Determination of current ERM and risk
ERM models in the guidelines and reports
-
the different analysis techniques
Determination of useful ERM guidelines and
Decision making and establish of the
suitable ERM framework
-
Determination of the risk identification
reports, best practices; Decision making of
tools, methods and models ; Definition of
which guides are using to developing ERM
current and possible risks to airport
model
-
of
shaped to ERM model
perceptions, ERM and risk culture by using of
-
Benchmarking
-
Develop a common risk language and ERM
terminology
Determination of the risk assessment
tools, methods and models
-
Assessment of the risk analysis result as
their impact and severity
AYSE KUCUK YILMAZ
-
7
Classification of risks in the four main
detailed steps are developed as arranged in
categories: strategic, financial, operational
order. Verbal models use words to represent
and threat risks,
some object or situation that exists, or could
-
Risk mapping and Risk prioritization
exist, in reality. Verbal models may range
-
Selection and application of agreeable risk
from a simple word presentation of scenery
responses
described in a book to a complex business
Establish continuously monitoring and review
decision problem (described in words and
function
numbers). A firm's mission statement is a
-
v.
Data flow and feedback; Analysis of
model of its beliefs about what business it is
ERM implementation performance
in and sets the stage for the firm's
-
Update and improving of the ERM system
determination
-
Provide effective and well-timed data flow
(Encyclopedia of Management, 2006).
and feedback line and the determination of
-
of
goals
and
objectives
The study is prepared according to the
their context
Istanbul-Atatürk
Assessment of the organizational ERM
Turkey. The implementation of the ERM
application performance in respect of the both
model is not a "one-size-fits-all" analysis. So,
system and the related managers & staff
the model is tailored according to the
vi.
Provide continuous improvement &
International
Airport
in
qualifications and various parameters of the
development about ERM Process
Turkey Airports and especially to the
-
Provide continuity both ERM system and its
Istanbul-Atatürk International Airport. All
improving; Restart to ERM process over loop
efforts achieved with coordinated studies with
to new and developing risk and environment
airport managers in the Turkey as following
This
model
is
ERM
framework
to
steps:
implementation in the airport. It has serial steps.
- Turkey airports are analyzed about ERM
Every sub-step is sufficiently explaine to “what
infrastructure and capabilities, objectives and
should do related main steps”.
wants related ERM.
Main research problem is creation of new and
suitable
ERM
framework
model
and
its
appropriate adaptation for airports. This study is
focus on this problem and its solution.
Verbal model is used to developing of new
ERM model. As a known, verbal models tell the
real system or process with words. In these kinds
of the models components and relationships are
define with words. In this study, main and
- The model tailored according to the
determinations.
- Basic ERM framework and process is
prepared according to the general ERM
context.
- ERM
model
integrated
with
organizational ERM process.
- ERM Information Management System
(ERM-IMS) developed as shown figure 2.
AYSE KUCUK YILMAZ
8
ERM information management systems are
system. Their system is analyzed during the
designed to overcome the problem of aggregating
study preparation process. Sydney airport has
data across the organization. The design of an
integrated risk management system. Finally,
information
an ERM practice has very narrow airport
system
depends
on
the
risk
measurement methodology that a firm chooses.
business samples across the world.
The current and likely future improvements in
The Istanbul-Atatürk International Airport
risk management information systems make
is selected as research sampling in this study
feasible new ways of collecting aggregate data on
which there is biggest and prior airport in the
firms’ risk-taking activities. The problem of
Turkey
designing an
information
system
for
risk
The study is separate and superior from
management is a problem of aggregation
other frameworks in the ERM guides and
(Gibson, 1997).
reports since the study focused critical
4. Results
elements for the airports. They are;
The model is based on author doctoral
- External and internal pressures to the airport
dissertation about “Enterprise Risk Management
management
Implementations and The Model Suggestion to
- Airport risks as enterprise wide: strategic,
the Airports in the Turkey”. Developed ERM
financial,
model is generally implemented in International
categories
Istanbul Airport because of the scope of this
- ERM committee structure
study, characteristics of the subject and time for
- ERM implementation process and their
giving
steps
results.
The
model
implementation
operational
and
threats
risk
executed with high level airport managers as
- Critical success factors
coordinated
- Integration of ERM to organizational
studies.
The
model
and
implementation results are presented to these
managers. They are started efforts related in
establish ERM framework in their airports since
2006. This can be considered as study’s
contribution to airport sectors.
Any framework model not exists in the world
structure
Completed and achieved studies within this
research period are given following order:
a.
A questionnaire as a qualitative research
technique
is
prepared
to
investigate
perception and approach of ERM across
and Turkey according to the airport ERM
organization and their personnel.
implementation. Also, the any conceptual and
questionnaire,
theoretical study doesn’t exist in Turkey about
unstructured question sets, is applied to major
ERM. In this concept, suggested model is
airports. Questions of questionnaire are
prepared as
these deficiencies.
prepared to demonstrate risk and ERM
However Fraport A.G. has successful ERM
perceptions with other substructure elements
to
answer
including
structured
This
and
AYSE KUCUK YILMAZ
9
of effective ERM. Also, the questionnaire is
knowledge and experience in application of
prepared
the active principles of ERM. ERM simply
to
determine
the
situation
and
dimensions of governance since ERM interrelated
enables
with
strategic
effectively in environments filled with risks,
management, strategic planning, organizational
and in volatile markets such as Turkey
objectives and mission of enterprise.
(Kucuk Yilmaz, 2006).
b.
corporate
governance,
Applicability analysis of ERM is achieved
management
to
operate
more
Acknowledgements
for all airports in Turkey. Results of this analysis
The study is basically based on: “Ayse
used to determination of current situation of ERM
Kucuk Yilmaz, ‘Enterprise Risk Management
substructure.
Implementations and the Model Suggestion to
Also,
main
requirement
and
deficiencies are determinates with this study.
c.
New ERM framework model is created for
the
Airports
Dissertation,
in
the
Turkey’,
Anadolu
Doctoral
University,
Social
airports and integrated general ERM process. The
Science Institute, Civil Aviation Management
model offered to airport managers to establish
Branch, Eskisehir, Turkey, 2007”). The
their system.
Author would like to thank the airport
ERM age started in the Turkey’s air
managers who assisted with this research:
transportation sector: airports and airlines. This is
TAV CEO Sani SENER and other TAV
an important development for Turkey civil
managers; high level managers of the Celebi-
aviation sector.
Ic Holding, at Turkey.
The fact that the nature and importance of air
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AYSE KUCUK YILMAZ
11
Fig.-1. Schematic representation of the ERM Implementation Model. (Kucuk Yilmaz, A. 2007).
Fig.-2. Schematic representation of the ERM Information System (ERM-IS), (Kucuk Yilmaz, A.
2007).