Empowered Enterprise Risk Management

Preface

IN THIS BOOK, WE ARE INTERESTED in how firms should organize themselves to deal with risks affecting their performance, as well as the process of risk‐taking itself. When enterprise risk management (ERM) arrived on the scene in the 1990s, it presented itself as a framework that allows firms to deal with precisely these questions. ERM brought novel ideas to bear on the risk management process, such as the involvement of the board of directors and taking an integrated perspective on the firm's various risks. Ideas like these set corporate risk management on a whole new path, and the response has been massive among practitioners as much as academics. Today, ERM is a rapidly expanding field that has become the new benchmark for how to think about risk management in firms.

Our interest in principles means that we will take a tour of the theories of risk management in search of insights. Theory, as we will argue in the first chapter of the book, is not only of interest for its own sake. It can often be a powerful guide to action, as it articulates the problems to be solved and identifies the mechanisms whereby value can be created. In an eclectic and sprawling field such as ERM, which has proven to be an endlessly malleable concept, we feel that such a return‐to‐fundamentals approach has many benefits.

Our goal is to draw up a vision of an empowered version of ERM that fully leverages these value‐creating mechanisms and makes a real difference. But theory can only get you ...