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Karl Long is Executive Director of Risk Management, Health, Safety, Environmental and Security at Trulieve, with 35 years of experience across complex industries. A decorated Gulf War Air Medal recipient, he leads innovative risk, insurance and safety strategies, including first-in-class cannabis enterprise risk platforms that drive resilience, efficiency and shareholder value.
Traditional Integrated Risk Management (IRM) programs offer proven methods and a structured framework for identifying, assessing, managing and monitoring various risk factors and potential exposures to loss across a rather finite universe of possibilities. Enterprise Risk Management, Environmental, Social, Governance, risk and compliance concerns require a unified approach to ensure risk tolerance levels are established, understood and maintained across all corporate verticals. Ideally, these parameters stem from the creation and use of a Global Risk Map or Risk Roster and adherence to resulting ‘guardrails’ based on key data metrics flowing from a centralized technology platform. While challenging in any business setting, for a dynamic, highly regulated, emerging industry like cannabis, this traditional approach can be at best ineffective if not impossible to maintain. IRM in the Cannabis sector—described by one industry leader as building a rocket while at the same time blasting into space—requires innovation and a willingness to explore opportunities beyond traditional models or top-down corporate governance strategies. But where does this next-generation cannabis IRM process even start?
Let’s look at a few key factors that are key to success.
Executive Management, along with Board alignment, transparency and some level of understanding of the critical nature of IRM, is vital. Leadership that thinks purchasing insurance is the core function of Risk Management will potentially create huge gaps and unnecessary loss exposures in operations. Contrary to the feeling of security a supposedly comprehensive insurance program may provide, proper implementation of an Integrated Risk Management program ensures true risk mitigation through a well-considered multi-pronged strategy, considering all key elements of corporate operations.
Integrated Risk Management in the cannabis sector requires innovation and a willingness to move beyond traditional, top-down governance models.
Information Security and Data Credibility drive the entire process. In addition to being credible, the data must reflect the proper metrics to ensure success. To determine truly critical data sets beyond standard financial performance, historic loss experience and litigation volume, Key Performance Indicators (KPIs) must be developed that reflect best-in-class job performance and desired outcomes. Data trends should also deliver external information (customer mix, product demand, basket size, patient count, web transactions, water, power, nutrient input needs, etc.) to drive strategic planning.
To fully embrace the data–driven approach, a seed-tosale perspective and granular accountability are necessary. On the most basic level, this is simply knowing real-time the cost basis, revenue value, potential for ongoing demand and other risk/s, including precisely what, where, why and how the product is being grown, produced, manufactured, distributed and ultimately sold down to the batch, crop, product, bake or given cultivation cycle. This information may be even more critical for vendors, suppliers or the many related parties usually reflected in master services or management agreements or partner providers that are common in this business model. Starting with this critical information assures a strong Integrated Risk Management program foundation. In addition, opportunities for process improvement/s, optimal production expansion, identification of market drivers and needed alignment of key teams or verticals become evident. This transparency and clear understanding of company operations very much inform the Integrated Risk Management program's strategic considerations.
All of which can then be leveraged to create preferred insurance or emerging risk funding opportunities. Such potential is not available to organizations that lack credible data and critical guardrails to mitigate potential losses or exposures. Without cross-functional coordination and an advanced understanding of bottom–up, middle-out and top-down corporate operations, there is no solid basis for building an advanced Integrated Risk Management program. Clear Executive and Board guidance backed by diligent attention to a dynamic Global Risk Map and ever-emerging Risk Roster drives ultimate Quality Assurance through data-driven best-in-class grow, production, manufacturing, distribution and retail policies and procedures that are essential in the expanding Cannabis sector.
While elements of traditional Integrated Risk Management programs or status quo approaches are still integral to Cannabis operators, it is necessary to go beyond the ordinary to succeed in this challenging space. Lack of clear regulatory guidance coupled with weak operational policies and procedures, complex corporate structures and far-reaching partner agreements, all subject to ever-changing state mandates, requires an innovative approach leveraged by continuous improvement efforts. Federal constraints present additional challenges in all facets of operation for those who wish to ultimately enjoy the anticipated macro market regulatory changes that will once and for all transform the Cannabis space. Until then, operators and other industry stakeholders need to embrace innovation and pursue comprehensive Integrated Risk Management programs that demand cross-functional collaboration, data credibility and constant process improvement efforts to deliver success!
