Enterprise Risk Management: From Incentives to Controls, 2nd Edition

Preface

Plato once said that every man should have a son, plant a tree, and write a book. Well, with my wife Pam, we have three sons—our eldest son Brandon and our twins Austin and Garrett. I've planted several trees, mostly with the help of my gardener. And this is my first book, and it is on my forte, risk management.

I have spent my entire career of 30 years in risk management. About half of that time I've worked as a consultant, preaching the gospel of best practices in risk management. The other half of my career I've spent in industry, trying to practice what I've preached under the realities of day-to-day business. More recently, in November of 2012 I joined the Board of Directors of E*TRADE Financial Corporation, where I chair the Risk Oversight Committee and am a member of the Audit Committee. My rotations through these three roles—as consultant, manager, and board member—have taught me that successful risk management is all about balance.

Firstly, risk management is about balancing risk and reward. Interestingly, the Chinese characters for risk () are actually the combination of the characters for danger and opportunity. Business leaders are natural risk takers because they were put into leadership positions as a result of past successes. The challenge for leaders is to take intelligent risks. Running a successful business is all about pursuing the right business opportunities ...