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Strategy and Risk Management

Book Description

Employees make dozens of day-to-day decisions—and any one of them could come back to haunt you, even when the decision does not seem to have hidden or unknown ramifications. That is why your organisation must have a protocol in place for identifying and mitigating all major business risks long before it is needed.

At the strategic level, risk management and strategic management are intertwined. Using this book, learn how to apply powerful tools and approaches to make your planning processes more effective and flexible and build a set of decision-making processes based on plain language. Author, Ron Rael, uses quality concepts/language (TQM & Six Sigma) to define the Enterprise Risk Management (ERM) process and value of prevention, while showing how these elements are both necessary and highly desired in an organisation’s strategic decision-making.

ERM extends to your everyday business decisions because employees take actions and make daily choices that could have a detrimental effect on your profits and business’s longevity and future. This book will

  • provide a best practices view on the latest developments in ERM
  • deliver how-to guidance on developing ERM processes at the enterprise and department levels
  • facilitate enterprise-wide ERM participation via practical information and examples
  • deliver cross-functional management and implementation of ERM

Table of Contents

  1. Cover Page
  2. Title Page
  3. Copyright Page
  4. Dedication and Acknowledgements
  5. Contents
  6. Introduction
  7. Chapter 1: Introduction to Enterprise Risk Management
    1. Who This Book Is for
    2. Success Requires Commitment to Risk Management
    3. Risk Management Defined
    4. Stewardship and Risk Management
    5. Cost and Risk Management
      1. The Cost of Success
      2. The Cost of Failure
    6. Summary of Risk Management-Watching for the Potholes
    7. Your Action Plan
  8. Chapter 2: The WHAT of Risk Management
    1. What Risk Management Is
      1. The Born (Entrepreneur) Incident
      2. What Risk Management Is Not
    2. Risk Taking Versus Risk Management
      1. Risk Taking Is Necessary for Survival
      2. Risk Management Is Necessary for Success and Growth
    3. What Risk Is
      1. Risk Can Be Seen from Two Views
      2. Risk Can Be Unpredictable
      3. Your Personal Risk Appetite
      4. Risk Management Tool One-Personal Risk Spectrum
    4. What a Risk Management Programme Is
      1. You Already Manage Risk
      2. Preview of a Risk Management Structure
    5. Cost of a Risk Management Programme
      1. Cost-Awareness That Risk Exists
      2. Cost-Finding Appropriate Balance
      3. Cost-Measuring Your Exposure
      4. Cost-Setting Appropriate Goals
      5. Cost-Willingness to Alter Your Plans
    6. Cost-Embracing the Pains of Change
    7. The Catch-22 Syndrome of Risk Management
      1. Catch 1
      2. Catch 2
      3. Risk Taking Is a Paradox
      4. Back to PJI
    8. Onward
    9. Your Action Plan
  9. Chapter 3: WHY Is Risk Management Important to Us?
    1. Reasons Why Formal Risk Management Is Vital to Success
      1. Reason 1
      2. Reason 2
    2. Reasons to Care about Formal Risk Management
      1. Not Just Risk Avoidance
      2. It’s a Small (Appliance) World
    3. Why Peril Awareness Is a Group Effort
    4. Why Risk Management Is a Leadership Responsibility
      1. Desire for Innovation and Creativity
      2. Need for Fraud Prevention and Detection or Proper Governance
      3. Need Adequate Checks and Balances
      4. Desire to Maximise Profits
      5. Need for Good Stewardship of Corporate Assets
    5. Ten Ways ERM Can Make an Impact
    6. Onward
    7. Your Action Plan
  10. Chapter 4: WHICH Risks Do We Need to Be Concerned about?
    1. Enterprise Risk Management Step One-Obtain Consensus on Allowable Risk
      1. Risk Management Tool Two: Process for Gaining Consensus on What Risk Looks Like
      2. Why Defining Risk Is Necessary in Enterprise Risk Management
    2. Evaluating Risk
      1. Immediacy of Risk
      2. Size of Risk
      3. Impact of Risk
      4. Scope of Risk
      5. Back to PJI
    3. How to Make an Internal Strategic Risk Assessment
      1. Risk Management Tool Three-Strategic Risk Assessment
      2. What Strategic Risk Management Is
    4. Three Examples of Tools to Assess Risk
      1. Risk Management Tool Four-Risk Tolerance Questionnaire
      2. Risk Management Tool Five-Critical Risk Questionnaire
      3. Risk Management Tool Six-Critical Risk Path
    5. Three Case Studies
      1. Case Study: The Risk in Giving Incentives to Certain Employees
      2. Case Study: The Risk of Doing Business in a Third-World Country
      3. Case Study: The Risk of New Technology
    6. Onward
    7. Your Action Plan
  11. Chapter 5: WHEN Is It Appropriate to Plan for Risk?
    1. Plan for Risk before It Happens
      1. Mark’s Failure to Anticipate Risk
      2. Mark’s Pitfall
      3. Back to PJI
    2. ERM Step Two-Seek Out the Global Sources of Risk
    3. Strategic Objectives and ERM
      1. Relationship of Strategic Planning and Risk Management
      2. Assessing Your Strategic Risk
    4. Operational Objectives and ERM
      1. Operational Risk
      2. Mitigating Operational Risk
    5. When to Apply Risk Management
      1. Daily, Monthly and Annual Goals
      2. New Initiatives
      3. Everyday Business Decisions
      4. Opportunities and Threats
    6. Risk Assessing When Scenario Planning
    7. Tool for Measuring Risk
      1. Risk Management Tool Seven-Risk and Opportunity Measurement and Management Strategy Grid...
      2. Case Study: The Opportunity to Invest
      3. Case Study: The Risk of Losing Qualified Talent
      4. Case Study : Avoiding Termination Blowback
      5. Lessons from the Case Studies
    8. Onward
    9. Action Plan
  12. Chapter 6: WHERE Do Our Efforts Need to Be?
    1. Sources of Jeopardy
      1. Harry
      2. Holistic Approach
    2. ERM Step Three-Analyse the Ability of Your Organisation to Handle Risk
      1. Risk Management Tool Eight-Culture Assessment
      2. Embedded in the Cultural Fabric
      3. What Is Culture?
      4. How a Culture Story Is Developed
      5. Visible Clues about Risk in Your Cultural Norms
      6. Culture Must Never Be Downplayed
      7. Determining Your Culture’s View of Risk Taking
      8. Risk Management Tool Nine-Assessment of a Balanced Culture
    3. Barriers to ERM Implementation
      1. Obstacle One: Perceived Cost in Dollars and Time
      2. Obstacle Two: Denial That ERM Is Necessary
      3. Obstacle Three: Leaders’ Resistance
      4. Obstacle Four: Employee Attitudes
    4. Ways to Integrate ERM into Your Culture
      1. Bring Your People Resources Together
      2. Ensure Employee Acceptance through Training
      3. Build Enthusiasm
      4. Make it a Bottom-Line Issue
      5. Risk Management Tool Ten-Responsibility Statement
      6. Teach Managers about Risk Management
    5. Five ERM Actions for Immediate Implementation
      1. Risk Management Tool Eleven-SLOT Analysis
      2. SLOT Versus SWOT.
      3. Your External Threats and Risk Management
      4. Your Opportunities and Risk Management
    6. Onward
    7. Your Action Plan
  13. Chapter 7: WHO Needs to Be Involved?
    1. Risk Management Is a Team Effort
      1. CRO
      2. Risk Management Team
      3. Board of Directors
      4. Oversight Group in Small Organisations
    2. Finance’s Role in ERM
    3. Insurance’s Role in Risk Management
      1. Insurance Does Not Always Reduce Exposure
      2. Insurance’s Inadequacy
    4. ERM Step Four: Minimise Exposure to Risk
      1. Look for Risk during Times of Success
      2. Look for Risk in Your Vulnerable and Hidden Areas
      3. Look for Risk in Your Timelines
    5. Integrate ERM Goals into Existing Infrastructure
      1. Budgeting Process
      2. Reporting and Feedback Process
      3. Goals and Measurements System
      4. Prioritisation Process
      5. Project Development and Funding Process
    6. Minimise Internal Risk of Unethical Employee Behaviour
      1. Risk and POLR
      2. Setting the Expectation for Ethical Behaviours
      3. Unreasonable Policies Increase Ethics Risk
      4. Unreasonable Expectations Increase Ethics Risk
      5. Incentives Increase Ethics Risk
    7. Internal Pressures Increase Ethics Risk
      1. Risk from Fraud and Employee Abuses
    8. Two Tools to Analyse and Reduce Exposure to Ethics Risk
      1. Risk Management Tool Twelve-The Five Whys
      2. Risk Management Tool Thirteen-Establish Contingency Funds
      3. Back to PJI
    9. Onward
    10. Your Action Plan
  14. Chapter 8: HOW Do We Conduct Enterprise Risk Management?
    1. Process for the Leadership Body to Implement Risk Management
      1. Checklist for Implementing Risk Management
      2. Minimum Elements to Establish Risk Awareness
      3. Starting to Implement ERM
    2. ERM Step Five: Recover Quickly from the Negative Impacts of the Risk
      1. Empower Employees to Act
      2. Match Authority with Responsibility
    3. Five Tools to Help Clarify Accountability and Empower Employees to Act
      1. Risk Management Tool Fourteen-Risk Authority and Responsibility Chart
      2. Risk Management Tool Fifteen-Formalised Action Plan
      3. Risk Management Tool Sixteen-Formalised Action Plan Summary
      4. Risk Management Tool Seventeen-Pitfall Analysis
      5. Risk Management Tool Eighteen-Controllable, Negotiable and Given Analysis
    4. Onward
    5. Your Action Plan
  15. Chapter 9: What Happens NEXT?
    1. Reconciling Different Views of Risk
      1. Teri and Kris
      2. Risk Management Tool Nineteen-Criteria Checkerboard
    2. ERM Step Five and One-Half: Learn Something (So You Can Accept Even More Risk with Confidence)
      1. Evaluating Your ERM Efforts
      2. Interpreting Results
      3. Tracking Process Output Versus Reality
      4. Scenario Planning Again
      5. Learning Lessons
      6. Risk Management Tool Twenty-Plus/Delta Analysis
      7. The Risk Audit
      8. Ongoing Protection
    3. Lessons Learned
    4. Onward
      1. End of the Line
      2. Five and One-Half Myths of ERM
      3. ERM Tool Kit
    5. Your Action Plan
  16. Chapter 10: Epilogue
    1. Justin
    2. Paul
    3. PJI International
    4. The Future Is Bright
    5. You and Your Organisation
    6. Case Study: The Hornet’s Nest
    7. Onward
  17. Appendix A: High Road Institute’s Process for Implementing an Effective Risk Management Programme
  18. Appendix B: What Happened in 2007?
  19. Appendix C: Enterprise Risk Management