Enterprise Risk Management
John Wiley & Sons Inc (Verlag)
9780470499085 (ISBN)
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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.
JOHN FRASER is the Vice President, Internal Audit, and Chief Risk Officer of Hydro One Networks Inc. He is an Ontario and Canadian Chartered Accountant, a Fellow of the Association of Chartered Certified Accountants (U.K.), a Certified Internal Auditor, and a Certified Information Systems Auditor. Fraser has more than 30 years' experience in the risk and control field, mostly in the financial services sector. He is currently the Chair of the Advisory Committee of the Conference Board of Canada's Strategic Risk Council and a Practitioner Associate Editor of the Journal of Applied Finance. BETTY J. SIMKINS, PHD, is the Williams Companies Professor of Business and Professor of Finance at Oklahoma State University. She has published more than 40 journal articles and book chapters. Many of these articles are on the topics of risk management and enterprise risk management. Simkins is also active in the finance profession and currently serves on the board of directors for the Financial Management Association, as co-editor of the Journal of Applied Finance, as Executive Editor of FMA Online, and as past president of the Eastern Finance Association. Prior to entering academia, she worked for Conoco-Phillips and Williams Companies.
Foreword by Robert S. Kaplan xix
Part I Overview 1
1 Enterprise Risk Management: An Introduction and Overview 3
What is Enterprise Risk Management? 3
Drivers of Enterprise Risk Management 4
Summary of the Book Chapters 5
Future of ERM and Unresolved Issues 15
Notes 16
About the Editors 16
2 A Brief History of Risk Management 19
Introduction 19
Risk Management in Antiquity 19
After the Middle Ages 20
The Past 100 Years 21
Notes 28
About the Author 29
3 ERM and Its Role in Strategic Planning and Strategy Execution 31
Rising Expectations for Strategic Risk Management 32
Integrating Risk into Strategic Planning 34
Creating a Strategic Risk Mindset and Culture 40
Building a Strategic Risk Assessment Process 42
Conclusion 48
Notes 48
About the Authors 50
4 The Role of the Board of Directors and Senior Management in Enterprise Risk Management 51
Introduction 51
Governance Expectations for Board Oversight of Risk Management 52
Delegation of Risk Oversight to Board Committees 58
Formalizing Risk Management Processes 58
Senior Executive Leadership in Risk Management 60
The Role of the Internal Audit Function in ERM 61
External Audit as an Independent Source of Key Risk Identification 61
ERM Implementation Strategies 62
Conclusion 66
Notes 67
Part II ERM Management, Culture, and Control 69
5 Becoming the Lamp Bearer: The Emerging Roles of the Chief Risk Officer 71
The Origins of the CRO 72
The CRO as Compliance Champion 75
The CRO as Modeling Expert 76
The CRO as Strategic Controller 77
The CRO as Strategic Advisor 78
Which CRO Role to Play? 79
Conclusion 81
Notes 82
References 82
Acknowledgments 85
About the Author 85
6 Creating a Risk-Aware Culture 87
The Importance of Culture 87
Elements of a Risk-Aware Culture 91
How to Create a Risk-Aware Culture 91
What Does Risk Management Have to Do? 94
Conclusion 95
References 95
About the Author 95
7 ERM Frameworks 97
Introduction 97
Elements of an ERM Framework 100
Risk Management Process (RMP) 102
Mandate and Commitment to the ERM Framework 110
Risk Management Policy 113
Integration of Risk Management and Resources for ERM 118
Communications, Consultation, and Reporting 119
Accountability 120
Continuous Improvement 121
Conclusion 122
References 122
About the Author 123
8 Identifying and Communicating Key Risk Indicators 125
Introduction 125
What is a Key Risk Indicator? 126
Practical Applications 129
Value of KRIs to Risk Management 134
Design Principles 135
Implementation Considerations 137
Conclusion 139
Note 139
Acknowledgment 140
About the Author 140
Part III ERM Tools and Techniques 141
9 How to Create and Use Corporate Risk Tolerance 143
Introduction 143
What is Risk Tolerance? 144
Why is Setting Risk Tolerance Important? 144
What Are the Factors to Consider in Setting Risk Tolerance? 145
How Can Your Organization Make Risk Tolerance Useful in Managing Risk? 150
Conclusion 152
Notes 153
About the Authors 154
10 How to Plan and Run a Risk Management Workshop 155
Introduction 155
What is a Risk Workshop? 155
Why Use Workshops? 156
How to Conduct a Risk Workshop 156
Preparation 156
Execution 165
Techniques for Planning and Facilitating Effective
Risk Workshops 168
Conclusion 170
About the Author 170
11 How to Prepare a Risk Profile 171
Introduction 171
Definition and Uses of a Corporate Risk Profile 171
Common Types of Corporate Risk Profiles 173
Advantages and Disadvantages of Information-Gathering Methodologies 176
How to Prepare a “Top 10” Risk Profile—Hydro One’s Experience 176
Conclusion 186
Notes 186
References 187
About the Author 188
12 How to Allocate Resources Based on Risk 189
Introduction 189
Risk Policy and a Center of Excellence for Risk Management 191
The Consequence Domain 193
Risk-Based Business Processes and Organizational Considerations 200
Concepts, Methods, and Models Enabling Risk Identification, Evaluation, Mitigation, Prioritization, and Management 206
Information Requirements and Challenges 211
Measures of Effectiveness for Continuous Improvement 213
Conclusion 213
Notes 214
About the Author 216
Appendix 12.A 216
13 Quantitative Risk Assessment in ERM 219
Introduction 219
Risk Assessment: Four Alternative Approaches 222
Aggregating Probabilities and Impacts 230
Total Corporate Risk: An Illustration 232
Incorporating Risk Quantification in the Business Planning Process 233
Sensitivities and Scenarios 233
Conclusion 234
Notes 235
References 235
About the Author 235
Part IV Types of Risk 237
14 Market Risk Management and Common Elements with Credit Risk Management 239
Introduction to Credit Risk and Market Risk 239
Responding to Credit and Market Risk 242
Measuring Market Risk 246
Market Risk Management with Forward-Type Products 250
Conclusion 259
Notes 259
References 260
About the Author 260
15 Credit Risk Management 261
Credit Risk Analysis 261
An Analysis of the Credit Crisis 272
Conclusion 277
Notes 277
References 277
About the Author 278
16 Operational Risk Management 279
Introduction 279
What is Operational Risk and Why Should You Care About It? 280
Is Risk All Bad? 283
How Do You Assess Operational Risks, Particularly in a Dynamic Business Environment? 284
Why You Need to Define Risk Tolerance for Aligned Decision Making 287
What Can You Do to Effectively Manage Operational Risk? 289
How Do You Encourage a Culture of Risk Management at the Operational Level? 296
How Do You Align Operational Risk Management with Enterprise Risk Management? 297
Conclusion 300
Notes 301
About the Author 301
17 Risk Management: Techniques in Search of a Strategy 303
Introduction 303
Current Situation 304
Risk Strategy Framework 307
Governance 312
New Directions 314
Conclusion 316
Notes 316
References 318
About the Author 320
18 Managing Financial Risk and Its Interaction with Enterprise Risk Management 321
Introduction 321
What is Financial Risk and How is It Managed? 322
Theoretical Underpinnings of Financial Hedging and Empirical Findings 325
Interaction of Financial Hedging with Other Types of Risk Management 328
What Can We Learn About ERM Given Our Knowledge of Financial Hedging? 332
Notes 333
References 333
About the Author 334
19 Bank Capital Regulation and Enterprise Risk Management 337
Introduction 337
The Evolution of Bank Capital Requirements 337
Conclusion 345
Notes 346
References 347
About the Author 349
20 Legal Risk Post-SOX and the Subprime Fiasco: Back to the Drawing Board 351
Introduction 351
The Legal Framework of Legal and Reputational Risk Management 352
An Assessment of the SOX Framework on Legal and Reputational Risk 359
Toward Optimal Reputational and Legal Risk Management 363
Conclusion 365
Note 365
References 365
About the Author 367
21 Financial Reporting and Disclosure Risk Management 369
The Importance of Disclosure Management and ERM 369
Foundations in the United States 370
Disclosure and Sarbanes-Oxley 371
Important SOX Sections 372
Other Financial Reporting 375
Risk Identification, Monitoring, and Reporting 377
Financial Reporting Challenges Today 379
Conclusion 383
Notes 383
References 384
About the Author 384
Part V Survey Evidence and Academic Research 385
22 Who Reads What Most Often?: A Survey of Enterprise Risk Management Literature Read by Risk Executives 387
Introduction 387
Survey Methodology 389
Survey Results 390
Conclusion 402
Appendix 22.A: Publications Included in the Survey 403
Appendix 22.B: Survey Respondents Who Gave Permission to Be Identified 410
Notes 410
References 412
About the Authors 416
23 Academic Research on Enterprise Risk Management 419
Introduction 419
Academic Research on Enterprise Risk Management 420
Case Studies on ERM 432
Conclusion 436
Notes 437
References 438
About the Authors 439
24 Enterprise Risk Management: Lessons from the Field 441
Introduction 441
Lessons from the ERM Process 442
Lessons from Integrating ERM with Ongoing Management Initiatives 449
Some Key Value Lessons from ERM 457
Conclusion 459
Notes 459
References 460
Further Reading 461
About the Authors 462
Part VI Special Topics and Case Studies 465
25 Rating Agencies’ Impact on Enterprise Risk Management 467
Introduction 467
Banking: General 468
Insurance: S&P 468
Insurance: Moody’s 470
Insurance: Fitch 471
Insurance: A.M. Best 472
U.S. Energy Companies: S&P 473
Nonfinancial Companies: S&P 473
A Fly in the Ointment 476
Conclusion 476
Notes 477
Further Reading 478
About the Author 478
26 Enterprise Risk Management: Current Initiatives and Issues 479
Question 1 482
Question 2 483
Question 3 489
Question 4 491
Question 5 493
Question 6 495
Question 7 497
Question 8 499
Notes 502
27 Establishing ERM Systems in Emerging Countries 505
Introduction 505
Enterprise Risk Management and Its Benefits in Emerging Markets 506
Observations of ERM Practices in Emerging Countries 524
Conclusion 524
Appendix: COSO Approach to Enterprise Risk Management 525
Notes 527
References 528
About the Author 528
28 The Rise and Evolution of the Chief Risk Officer: Enterprise Risk Management at Hydro One 531
Hydro One 533
Getting Started with ERM 533
Processes and Tools 538
Corporate Risk Profile 543
Quantifying the Unquantifiable 548
Benefits of ERM and Outcomes at Hydro One 550
Conclusion 553
Notes 553
About the Authors 556
Index 557
| Reihe/Serie | Robert W. Kolb Series |
|---|---|
| Zusatzinfo | Charts: 102 B&W, 0 Color |
| Verlagsort | New York |
| Sprache | englisch |
| Maße | 188 x 259 mm |
| Gewicht | 1179 g |
| Themenwelt | Wirtschaft ► Betriebswirtschaft / Management ► Allgemeines / Lexika |
| Wirtschaft ► Betriebswirtschaft / Management ► Finanzierung | |
| ISBN-13 | 9780470499085 / 9780470499085 |
| Zustand | Neuware |
| Informationen gemäß Produktsicherheitsverordnung (GPSR) | |
| Haben Sie eine Frage zum Produkt? |
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