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Enterprise Risk Management

Book Description

Essential insights on the various aspects of enterprise risk management

If you want to understand enterprise risk management from some of the leading academics and practitioners of this exciting new methodology, Enterprise Risk Management is the book for you. Through in-depth insights into what practitioners of this evolving business practice are actually doing as well as anticipating what needs to be taught on the topic, John Fraser and Betty Simkins have sought out the leading experts in this field to clearly explain what enterprise risk management is and how you can teach, learn, and implement these leading practices within the context of your business activities. In this book, the authors take a broad view of ERM, or what is called a holistic approach to ERM.

Enterprise Risk Management introduces you to the wide range of concepts and techniques for managing risk in a holistic way that correctly identifies risks and prioritizes the appropriate responses. This invaluable guide offers a broad overview of the different types of techniques: the role of the board, risk tolerances, risk profiles, risk workshops, and allocation of resources, while focusing on the principles that determine business success. This comprehensive resource also provides a thorough introduction to enterprise risk management as it relates to credit, market, and operational risk, as well as the evolving requirements of the rating agencies and their importance to the overall risk management in a corporate setting. Filled with helpful tables and charts, Enterprise Risk Management offers a wealth of knowledge on the drivers, the techniques, the benefits, as well as the pitfalls to avoid, in successfully implementing enterprise risk management.

  • Discusses the history of risk management and more recently developed enterprise risk management practices and how you can prudently implement these techniques within the context of your underlying business activities
  • Provides coverage of topics such as the role of the chief risk officer, the use of anonymous voting technology, and risk indicators and their role in risk management
  • Explores the culture and practices of enterprise risk management without getting bogged down by the mathematics surrounding the more conventional approaches to financial risk management

This informative guide will help you unlock the incredible potential of enterprise risk management, which has been described as a proxy for good management.

Table of Contents

  1. Cover
  2. Series
  3. Title
  4. Copyright
  5. Foreword
  6. PART I: Overview
    1. CHAPTER 1: Enterprise Risk Management: An Introduction and Overview
      1. WHAT IS ENTERPRISE RISK MANAGEMENT?
      2. DRIVERS OF ENTERPRISE RISK MANAGEMENT
      3. SUMMARY OF THE BOOK CHAPTERS
      4. FUTURE OF ERM AND UNRESOLVED ISSUES
      5. NOTES
      6. ABOUT THE EDITORS
    2. CHAPTER 2: A Brief History of Risk Management
      1. INTRODUCTION
      2. RISK MANAGEMENT IN ANTIQUITY
      3. AFTER THE MIDDLE AGES
      4. THE PAST 100 YEARS
      5. NOTES
      6. ABOUT THE AUTHOR
    3. CHAPTER 3: ERM and Its Role in Strategic Planning and Strategy Execution
      1. RISING EXPECTATIONS FOR STRATEGIC RISK MANAGEMENT
      2. INTEGRATING RISK INTO STRATEGIC PLANNING
      3. CREATING A STRATEGIC RISK MINDSET AND CULTURE
      4. BUILDING A STRATEGIC RISK ASSESSMENT PROCESS
      5. CONCLUSION
      6. NOTES
      7. ABOUT THE AUTHORS
    4. CHAPTER 4: The Role of the Board of Directors and Senior Management in Enterprise Risk Management
      1. INTRODUCTION
      2. GOVERNANCE EXPECTATIONS FOR BOARD OVERSIGHT OF RISK MANAGEMENT
      3. DELEGATION OF RISK OVERSIGHT TO BOARD COMMITTEES
      4. FORMALIZING RISK MANAGEMENT PROCESSES
      5. SENIOR EXECUTIVE LEADERSHIP IN RISK MANAGEMENT
      6. THE ROLE OF THE INTERNAL AUDIT FUNCTION IN ERM
      7. EXTERNAL AUDIT AS AN INDEPENDENT SOURCE OF KEY RISK IDENTIFICATION
      8. ERM IMPLEMENTATION STRATEGIES
      9. CONCLUSION
      10. NOTES
  7. PART II: ERM Management, Culture, and Control
    1. CHAPTER 5: Becoming the Lamp Bearer: The Emerging Roles of the Chief Risk Officer
      1. THE ORIGINS OF THE CRO
      2. THE CRO AS COMPLIANCE CHAMPION
      3. THE CRO AS MODELING EXPERT
      4. THE CRO AS STRATEGIC CONTROLLER
      5. THE CRO AS STRATEGIC ADVISOR
      6. WHICH CRO ROLE TO PLAY?
      7. CONCLUSION
      8. NOTES
      9. REFERENCES
      10. ACKNOWLEDGMENTS
      11. ABOUT THE AUTHOR
    2. CHAPTER 6: Creating a Risk-Aware Culture
      1. THE IMPORTANCE OF CULTURE
      2. ELEMENTS OF A RISK-AWARE CULTURE
      3. HOW TO CREATE A RISK-AWARE CULTURE
      4. WHAT DOES RISK MANAGEMENT HAVE TO DO?
      5. CONCLUSION
      6. REFERENCES
      7. ABOUT THE AUTHOR
    3. CHAPTER 7: ERM Frameworks
      1. INTRODUCTION
      2. ELEMENTS OF AN ERM FRAMEWORK
      3. RISK MANAGEMENT PROCESS (RMP)
      4. MANDATE AND COMMITMENT TO THE ERM FRAMEWORK
      5. RISK MANAGEMENT POLICY
      6. INTEGRATION OF RISK MANAGEMENT AND RESOURCES FOR ERM
      7. COMMUNICATIONS, CONSULTATION, AND REPORTING
      8. ACCOUNTABILITY
      9. CONTINUOUS IMPROVEMENT
      10. CONCLUSION
      11. REFERENCES
      12. ABOUT THE AUTHOR
    4. CHAPTER 8: Identifying and Communicating Key Risk Indicators
      1. INTRODUCTION
      2. WHAT IS A KEY RISK INDICATOR?
      3. PRACTICAL APPLICATIONS
      4. VALUE OF KRIs TO RISK MANAGEMENT
      5. DESIGN PRINCIPLES
      6. IMPLEMENTATION CONSIDERATIONS
      7. CONCLUSION
      8. NOTE
      9. ACKNOWLEDGMENT
      10. ABOUT THE AUTHOR
  8. PART III: ERM Tools and Techniques
    1. CHAPTER 9: How to Create and Use Corporate Risk Tolerance
      1. INTRODUCTION
      2. WHAT IS RISK TOLERANCE?
      3. WHY IS SETTING RISK TOLERANCE IMPORTANT?
      4. WHAT ARE THE FACTORS TO CONSIDER IN SETTING RISK TOLERANCE?
      5. HOW CAN YOUR ORGANIZATION MAKE RISK TOLERANCE USEFUL IN MANAGING RISK?
      6. CONCLUSION
      7. NOTES
      8. ABOUT THE AUTHORS
    2. CHAPTER 10: How to Plan and Run a Risk Management Workshop
      1. INTRODUCTION
      2. WHAT IS A RISK WORKSHOP?
      3. WHY USE WORKSHOPS?
      4. HOW TO CONDUCT A RISK WORKSHOP
      5. PREPARATION
      6. EXECUTION
      7. TECHNIQUES FOR PLANNING AND FACILITATING EFFECTIVE RISK WORKSHOPS
      8. CONCLUSION
      9. ABOUT THE AUTHOR
    3. CHAPTER 11: How to Prepare a Risk Profile
      1. INTRODUCTION
      2. DEFINITION AND USES OF A CORPORATE RISK PROFILE
      3. COMMON TYPES OF CORPORATE RISK PROFILES
      4. ADVANTAGES AND DISADVANTAGES OF INFORMATION-GATHERING METHODOLOGIES
      5. HOW TO PREPARE A “TOP 10” RISK PROFILE—HYDRO ONE’S EXPERIENCE
      6. CONCLUSION
      7. NOTES
      8. REFERENCES
      9. ABOUT THE AUTHOR
    4. CHAPTER 12: How to Allocate Resources Based on Risk
      1. INTRODUCTION
      2. RISK POLICY AND A CENTER OF EXCELLENCE FOR RISK MANAGEMENT
      3. THE CONSEQUENCE DOMAIN
      4. RISK-BASED BUSINESS PROCESSES AND ORGANIZATIONAL CONSIDERATIONS
      5. CONCEPTS, METHODS, AND MODELS ENABLING RISK IDENTIFICATION, EVALUATION, MITIGATION, PRIORITIZATION, AND MANAGEMENT
      6. INFORMATION REQUIREMENTS AND CHALLENGES
      7. MEASURES OF EFFECTIVENESS FOR CONTINUOUS IMPROVEMENT
      8. CONCLUSION
      9. NOTES
      10. ABOUT THE AUTHOR
    5. CHAPTER 13: Quantitative Risk Assessment in ERM
      1. INTRODUCTION
      2. RISK ASSESSMENT: FOUR ALTERNATIVE APPROACHES
      3. AGGREGATING PROBABILITIES AND IMPACTS
      4. TOTAL CORPORATE RISK: AN ILLUSTRATION
      5. INCORPORATING RISK QUANTIFICATION IN THE BUSINESS PLANNING PROCESS
      6. SENSITIVITIES AND SCENARIOS
      7. CONCLUSION
      8. NOTES
      9. REFERENCES
      10. ABOUT THE AUTHOR
  9. PART IV: Types of Risk
    1. CHAPTER 14: Market Risk Management and Common Elements with Credit Risk Management
      1. INTRODUCTION TO CREDIT RISK AND MARKET RISK
      2. RESPONDING TO CREDIT AND MARKET RISK
      3. MEASURING MARKET RISK
      4. MARKET RISK MANAGEMENT WITH FORWARD-TYPE PRODUCTS
      5. CONCLUSION
      6. NOTES
      7. REFERENCES
      8. ABOUT THE AUTHOR
    2. CHAPTER 15: Credit Risk Management
      1. CREDIT RISK ANALYSIS
      2. AN ANALYSIS OF THE CREDIT CRISIS
      3. CONCLUSION
      4. NOTES
      5. REFERENCES
      6. ABOUT THE AUTHOR
    3. CHAPTER 16: Operational Risk Management
      1. INTRODUCTION
      2. WHAT IS OPERATIONAL RISK AND WHY SHOULD YOU CARE ABOUT IT?
      3. IS RISK ALL BAD?
      4. HOW DO YOU ASSESS OPERATIONAL RISKS, PARTICULARLY IN A DYNAMIC BUSINESS ENVIRONMENT?
      5. WHY YOU NEED TO DEFINE RISK TOLERANCE FOR ALIGNED DECISION MAKING
      6. WHAT CAN YOU DO TO EFFECTIVELY MANAGE OPERATIONAL RISK?
      7. HOW DO YOU ENCOURAGE A CULTURE OF RISK MANAGEMENT AT THE OPERATIONAL LEVEL?
      8. HOW DO YOU ALIGN OPERATIONAL RISK MANAGEMENT WITH ENTERPRISE RISK MANAGEMENT?
      9. CONCLUSION
      10. NOTES
      11. ABOUT THE AUTHOR
    4. CHAPTER 17: Risk Management: Techniques in Search of a Strategy
      1. INTRODUCTION
      2. CURRENT SITUATION
      3. RISK STRATEGY FRAMEWORK
      4. GOVERNANCE
      5. NEW DIRECTIONS
      6. CONCLUSION
      7. NOTES
      8. REFERENCES
      9. ABOUT THE AUTHOR
    5. CHAPTER 18: Managing Financial Risk and Its Interaction with Enterprise Risk Management
      1. INTRODUCTION
      2. WHAT IS FINANCIAL RISK AND HOW IS IT MANAGED?
      3. THEORETICAL UNDERPINNINGS OF FINANCIAL HEDGING AND EMPIRICAL FINDINGS
      4. INTERACTION OF FINANCIAL HEDGING WITH OTHER TYPES OF RISK MANAGEMENT
      5. WHAT CAN WE LEARN ABOUT ERM GIVEN OUR KNOWLEDGE OF FINANCIAL HEDGING?
      6. NOTES
      7. REFERENCES
      8. ABOUT THE AUTHOR
    6. CHAPTER 19: Bank Capital Regulation and Enterprise Risk Management
      1. INTRODUCTION
      2. THE EVOLUTION OF BANK CAPITAL REQUIREMENTS
      3. CONCLUSION
      4. NOTES
      5. REFERENCES
      6. ABOUT THE AUTHOR
    7. CHAPTER 20: Legal Risk Post-SOX and the Subprime Fiasco: Back to the Drawing Board
      1. INTRODUCTION
      2. THE LEGAL FRAMEWORK OF LEGAL AND REPUTATIONAL RISK MANAGEMENT
      3. AN ASSESSMENT OF THE SOX FRAMEWORK ON LEGAL AND REPUTATIONAL RISK
      4. TOWARD OPTIMAL REPUTATIONAL AND LEGAL RISK MANAGEMENT
      5. CONCLUSION
      6. NOTE
      7. REFERENCES
      8. ABOUT THE AUTHOR
    8. CHAPTER 21: Financial Reporting and Disclosure Risk Management
      1. THE IMPORTANCE OF DISCLOSURE MANAGEMENT AND ERM
      2. FOUNDATIONS IN THE UNITED STATES
      3. DISCLOSURE AND SARBANES-OXLEY
      4. IMPORTANT SOX SECTIONS
      5. OTHER FINANCIAL REPORTING
      6. RISK IDENTIFICATION, MONITORING, AND REPORTING
      7. FINANCIAL REPORTING CHALLENGES TODAY
      8. CONCLUSION
      9. NOTES
      10. REFERENCES
      11. ABOUT THE AUTHOR
  10. PART V: Survey Evidence and Academic Research
    1. CHAPTER 22: Who Reads What Most Often?: A Survey of Enterprise Risk Management Literature Read by Risk Executives
      1. INTRODUCTION
      2. SURVEY METHODOLOGY
      3. SURVEY RESULTS
      4. CONCLUSION
      5. APPENDIX 22.A: PUBLICATIONS INCLUDED IN THE SURVEY
      6. APPENDIX 22.B: SURVEY RESPONDENTS WHO GAVE PERMISSION TO BE IDENTIFIED
      7. NOTES
      8. REFERENCES
      9. ABOUT THE AUTHORS
    2. CHAPTER 23: Academic Research on Enterprise Risk Management
      1. INTRODUCTION
      2. ACADEMIC RESEARCH ON ENTERPRISE RISK MANAGEMENT
      3. CASE STUDIES ON ERM
      4. CONCLUSION
      5. NOTES
      6. REFERENCES
      7. ABOUT THE AUTHORS
    3. CHAPTER 24: Enterprise Risk Management Lessons from the Field
      1. INTRODUCTION
      2. LESSONS FROM THE ERM PROCESS
      3. LESSONS FROM INTEGRATING ERM WITH ONGOING MANAGEMENT INITIATIVES
      4. SOME KEY VALUE LESSONS FROM ERM
      5. CONCLUSION
      6. NOTES
      7. REFERENCES
      8. FURTHER READING
      9. ABOUT THE AUTHORS
  11. PART VI: Special Topics and Case Studies
    1. CHAPTER 25: Rating Agencies’ Impact on Enterprise Risk Management
      1. INTRODUCTION
      2. BANKING: GENERAL
      3. INSURANCE: S&P
      4. INSURANCE: MOODY’S
      5. INSURANCE: FITCH
      6. INSURANCE: A.M. BEST
      7. U.S. ENERGY COMPANIES: S&P
      8. NONFINANCIAL COMPANIES: S&P
      9. A FLY IN THE OINTMENT
      10. CONCLUSION
      11. NOTES
      12. FURTHER READING
      13. ABOUT THE AUTHOR
    2. CHAPTER 26: Enterprise Risk Management: Current Initiatives and Issues
      1. QUESTION 1
      2. QUESTION 2
      3. QUESTION 3
      4. QUESTION 4
      5. QUESTION 5
      6. QUESTION 6
      7. QUESTION 7
      8. QUESTION 8
      9. NOTES
    3. CHAPTER 27: Establishing ERM Systems in Emerging Countries
      1. INTRODUCTION
      2. ENTERPRISE RISK MANAGEMENT AND ITS BENEFITS IN EMERGING MARKETS
      3. OBSERVATIONS OF ERM PRACTICES IN EMERGING COUNTRIES
      4. CONCLUSION
      5. APPENDIX: COSO APPROACH TO ENTERPRISE RISK MANAGEMENT
      6. NOTES
      7. REFERENCES
      8. ABOUT THE AUTHOR
    4. CHAPTER 28: The Rise and Evolution of the Chief Risk Officer: Enterprise Risk Management at Hydro One
      1. HYDRO ONE
      2. GETTING STARTED WITH ERM
      3. PROCESSES AND TOOLS
      4. CORPORATE RISK PROFILE
      5. QUANTIFYING THE UNQUANTIFIABLE
      6. BENEFITS OF ERM AND OUTCOMES AT HYDRO ONE
      7. CONCLUSION
      8. NOTES
      9. ABOUT THE AUTHORS
  12. Index
  13. End User License Agreement