Enterprise Risk Management: Today′s Leading Research and Best Practices for Tomorrow′s Executives (Robert W. Kolb Series)

Description

Unlock the incredible potential of enterprise risk management  There has been much evolution in terms of ERM best practices, experience, and standards and regulation over the past decade. Enterprise Risk Management: Today’s Leading Research and Best Practices for Tomorrow’s Executives, Second Edition is the revised and updated essential guide to the now immensely popular topic of enterprise risk management (ERM). With contributions from leading academics and practitioners, this book offers insights into what practitioners are doing and what the future holds. You’ll discover how you can implement best practices, improve ERM tools and techniques, and even learn to teach ERM. Retaining the holistic approach to ERM that made the first edition such a success, this new edition adds coverage of new topics including cybersecurity risk, ERM in government, foreign exchange risk, risk appetite, innovation risk, outsourcing risk, scenario planning,  climate change risk, and much more.  In addition, the new edition includes important updates and enhancements to topics covered in the first edition; so much of it has been revised and enhanced that it is essentially an entirely new book.  Enterprise Risk Management introduces you to the concepts and techniques that allow you to identify risks and prioritize the appropriate responses. This invaluable guide offers a broad overview, covering key issues while focusing on the principles that drive effective decision making and determine business success. This comprehensive resource also provides a thorough introduction to ERM as it relates to credit, market, and operational risk, as well as the evolving requirements of the board of directors’ role in overseeing ERM.   Through the comprehensive chapters and leading research and best practices covered, this book:  Provides a holistic overview of key topics in ERM, including the role of the chief risk officer, development and use of key risk indicators and the risk-based allocation of resources  Contains second-edition updates covering additional material related to teaching ERM, risk frameworks, risk culture, credit and market risk, risk workshops and risk profiles and much more.  Over 90% of the content from the first edition has been revised or enhanced Reveals how you can prudently apply ERM best practices within the context of your underlying business activities  Filled with helpful examples, tables, and illustrations, Enterprise Risk Management, Second Edition offers a wealth of knowledge on the drivers, the techniques, the benefits, as well as the pitfalls to avoid, in successfully implementing ERM.  Cover Title Page Copyright Contents Foreword to the Second Edition Foreword to the First Edition Part I Overview and Drivers of Enterprise Risk Management Chapter 1 Enterprise Risk Management: An Introduction and Overview What Is Enterprise Risk Management? Drivers of Enterprise Risk Management About This Second Edition Summary of the Book Chapters Future of ERM and Unresolved Issues Notes About the Editors Chapter 2 A Brief History of Risk Management Introduction Risk Management in Antiquity After the Middle Ages The Past 100 Years Final Words Notes About the Authors Chapter 3 Strategic Risk Management: The Third Paradigm Introduction The Foundation The Frame The Finish: Structure The Finish: Culture Conclusion Notes References About the Authors Chapter 4 The Role of the Board of Directors and Senior Management in Enterprise Risk Management Introduction Governance Expectations for Board Oversight of Risk Management Delegation of Risk Oversight to Board Committees Formalizing Risk Management Processes Senior Executive Leadership in Risk Management The Role of the Internal Audit Function in ERM External Audit as an Independent Source of Key Risk Identification ERM Implementation Strategies Role of the Audit Committee Role of the Board Training Board Composition Reporting Compliance Culture Conclusion Notes About the Author Chapter 5 How to Teach Enterprise Risk Management: A Learner‐Centered Activities Approach Introduction Pedagogic Approaches: Introducing Course Content Traditional Lecture Learner‐Centered Teaching (LCT) Flipped‐Classroom Learner‐Centered Activities (LCAs) Applying LCA: Applications and Analyses Conclusion Appendix 5.A: Learner‐Centered Activities (LCAs) Notes References About the Authors Chapter 6 The Role of the Board in Risk Management Oversight 1 The Challenges Risk Management Methodologies ISO 31000 COSO ERM 2004 What Is Enterprise Risk Management? Accountability for Board Oversight Overview of the Board's Role The Board and Internal Audit Conclusion Notes References About the Author Part II Enterprise Risk Management, Culture, and Control Chapter 7 ERM Frameworks Introduction Frameworks and Their Importance COSO Enterprise Risk Management—Integrating Strategy with Performance (COSO ERM) ISO 31000:2018, Risk Management—Guidelines (ISO 31000) Similarities and Differences The Influence of These Frameworks Advice and Closing Remarks References About the Authors Chapter 8 Becoming the Lamp Bearer: The Emerging Roles of the Chief Risk Officer The Origins of the CRO The CRO as Compliance Champion The CRO as Modeling Expert The CRO as Strategic Controller The CRO as Strategic Advisor Which CRO Role to Play? Conclusion Acknowledgments Notes References About the Author Chapter 9 Creating a Risk‐Aware Culture Introduction What Is Risk Culture? How to Create a Risk‐Aware Culture Leveraging the Power of Risk Culture in a Changing Environment Conclusion Note References About the Authors Chapter 10 Key Risk Indicators Introduction What Is a KRI? How Are KRIs Developed? How and When Should KRIs Be Used? Conclusion Reference About the Authors Chapter 11 Decision Risk Management Introduction The Process of Decision Making The Danger of Relying on Human Perceptions Two Interlinked Parts of a Decision Identifying Decision Uncertainties Analyzing Uncertainties and Prioritizing/Balancing Efforts Reporting and Leveraging Risk Management Follow Through and Drive Intelligent Risk Taking Notes References About the Author Chapter 12 Increasing Adoption of Enterprise Risk Management in the U.S. Federal Government Introduction Origins of ERM in the U.S. Federal Government Implementing ERM at a Federal Agency: The Importance of Cultural Acceptance Differences between ERM in Government and ERM in a Private Company Unusual Characteristics of the Governance Framework of the United States Next Steps for ERM in the U.S. Federal Government Notes References About the Author Chapter 13 Toolmaking in Risk Management: The Case of Core Values and the Formalization of “Risk Appetite” Summary Introduction Formalizing Risk Appetite—Can It Work? From Fatal Remedies to Formality That Works—and How New Accounting Begins Constructing Risk Appetite: Case Studies Discussion Conclusion Appendix 13.A: Consulting Reports: Definitions of Risk Appetite Notes References About the Author Chapter 14 Incorporating Risk Acumen and Enterprise Risk Management into Innovation Approaches Introduction Learning to Look around the Corner Enterprise Risk Management Should Be Involved Two Staple Topics—Change and Innovation Using Tools to Help Identify the Risk and Uncertainty Embracing Risk and Encouraging Innovation Innovation Processes Innovation Essentials A Portfolio Approach to Innovation Stages of Innovation Test, Not Bet? Business Model Innovation The Importance of Risk Assessments in Innovation Changing the Thinking and Conclusion Notes References About the Author Chapter 15 Scenario Planning as an Enrichment of Enterprise Risk Management Purpose, Scope, and Practice of Scenario Planning Methods for Scenario Development The deductive method in finance: growth and interest rate A set of global driving forces for the 2020s to 2040s: the big five A table to characterize possible global scenarios 2020–2045 using the “big five” driving forces Scenario Planning, Strategies, and Decisions Embedding Scenario Planning Practice Notes References Websites About the Author Chapter 16 Unconscious Bias and Risk Management Introduction Biases: Conscious versus Unconscious Biases Exist at All Levels of an Organization What Causes Cognitive Biases and Decision‐Making Errors in Risk Management? Evidentiary Biases Decision‐Making Biases Probability Biases Reducing Bias Conclusion References About the Author Chapter 17 Cognitive Bias: A Practical Approach Introduction Strategy 1: Slow Down Thinking and Use Detailed Risk Criteria Strategy 2: Broaden the Context Strategy 3: Use Probability Estimates Cautiously Strategy 4: Engineered Interaction Conclusion References and Further Reading About the Author Part III ERM Tools and Techniques Chapter 18 Risk Appetite and Tolerance in Competitive Strategy Introduction Considering Risk Appetite and Tolerance Ability to Take Risk Strategy and Governance Willingness to Take Risks Which Risks to Keep Key Elements in the Articulation of the Risk Appetite and Tolerance Summary of Key Elements Notes About the Authors Chapter 19 How to Plan and Run a Risk Management Workshop Introduction What Is a Risk Workshop? Why Use Workshops? How to Conduct a Risk Workshop Execution Techniques for Planning and Facilitating Effective Risk Workshops Conclusion Appendix 19.A: Facilitating Online Workshops Appendix 19.B: “Black Swan” Workshops Reference About the Author Chapter 20 How to Prepare a Risk Profile Introduction Definition and Uses of a Corporate Risk Profile How to Prepare a Risk Profile Advantages and Disadvantages of Information‐Gathering Methodologies Conclusion Notes References About the Authors Chapter 21 How to Allocate Resources Based on Risk Introduction Risk Policy and a Center of Excellence for Risk Management The Consequence Domain Risk‐Based Business Processes and Organizational Considerations Concepts, Methods, and Models Enabling Risk Identification, Evaluation, Mitigation, Prioritization, and Management Information Requirements and Challenges Measures of Effectiveness for Continuous Improvement Conclusion Notes About the Author Chapter 22 Quantitative Risk Assessment in ERM Introduction Risk Assessment: Four Alternative Approaches Aggregating Probabilities and Impacts Total Corporate Risk: An Illustration Incorporating Risk Quantification in the Business Planning Process Sensitivities and Scenarios Conclusion Notes References About the Author Chapter 23 Risk Appetite Introduction Context and Principles Methodology Discussion Conclusion References About the Author Chapter 24 Organizational Decision Making Introduction What's at Risk? Evolving Risk Definitions The Balancing Act Defining the Risk Appetite Target Risk Appetite Interpreting the Risk Appetite Objective Decision‐Making Model Embedding the Risk Appetite into the Benefit Score Conclusion Notes References Acknowledgments About the Author Chapter 25 The Challenges of and Solutions for Implementing Enterprise Risk Management* 1. The Importance of Enterprise Risk Management 2. The Challenges 3. The Solutions 4. Conclusion References About the Authors Part IV Types of Risk Chapter 26 Market Risk Management and Common Elements with Credit Risk Management Introduction to Credit Risk and Market Risk Responding to Credit and Market Risk Measuring Market Risk Market Risk Management with Forward‐Type Products Conclusion Notes References About the Author Chapter 27 Credit Risk Management Credit Risk Analysis An Analysis of the 2007–2009 Credit Crisis Conclusion Notes References About the Author Chapter 28 Operational Risk Management Introduction What Is Operational Risk and Why Should You Care About It? Is Risk All Bad? How Do You Assess Operational Risks, Particularly in a Dynamic Business Environment? Why You Need to Define Risk Tolerance for Aligned Decision Making What Can You Do to Effectively Manage Operational Risk? How Do You Encourage a Culture of Risk Management at the Operational Level? How Do You Align Operational Risk Management with Enterprise Risk Management? Conclusion Notes About the Author Chapter 29 Managing Financial Risk and Its Interaction with Enterprise Risk Management Introduction What Is Financial Risk and How Is It Managed? Theoretical Underpinnings of Financial Hedging and Empirical Findings Interaction of Financial Hedging with Other Types of Risk Management What Can We Learn About ERM Given Our Knowledge of Financial Hedging? Conclusion Notes References About the Author Chapter 30 Climate Change Risk Introduction The Causes of Climate Change The Effects of Climate Change Possible Global Solutions Implications for Enterprise Risk Management Conclusion Appendix Notes References About the Authors Chapter 31 Cybersecurity: Risks and Governance Introduction Cybersecurity in the Enterprise: What Can Go Wrong? How to Protect Yourself: A Best Efforts Approach to Securing Your Critical Cyber Assets Conclusion Notes References About the Authors Chapter 32 Foreign Exchange Risk Management Introduction Conclusion Notes References About the Authors Chapter 33 Risk Management and Outsourcing Introduction Objectives of Outsourcing Outsourcing‐Related Risks Mitigation Approaches Conclusion Notes References About the Author Chapter 34 Leveraging ERM for Growth Introduction Rethinking Risk through a Growth Lens The Unrealized Potential of ERM Components of Integrating ERM into Strategic Decisions Conclusion Acknowledgments Notes About the Author Chapter 35 Commercial and D&O Insurance for Large Corporations: Best Practices in Protecting the Assets and Liabilities of Directors and Officers and Their Organizations Introduction The Key Organizational Risks (Insured and Not Insured) Directors and Officers Insurance Summarizing Insurance Details and Claims for Board Oversight Purposes Roles and Responsibilities The Insurance Marketing Process Conclusion Appendix 35.A: Checklist of Key D&O Insurance Policy Extensions Appendix 35.B: Broker Responsibilities, Sample Broker Service Agreement Summary of Service Appendix 35.C: Checklist—The Process for Marketing Large Insurance Programs Appendix 35.D: Director's Questions Notes About the Author Chapter 36 Managing Risk Associated with Project Delivery: A How‐To Guide Introduction The Many Faces of Risk—Before, During, and After Managing Project Risk—It's a Team Sport Soar with the Eagles and Peck with the Chickens Scope, Quality, Effort, Risk, and Time (SQERT) Don't Forget About the Humans Follow the Leader Do a Risk Workshop Early and Revisit Approaching the Finish Line Risk Does Not Disappear at Go‐Live Conclusion References About the Author Part V Special Topics and Case Studies Chapter 37 The Rise and Evolution of the Chief Risk Officer: Enterprise Risk Management at Hydro One Introduction Hydro One Getting Started with ERM Processes and Tools Corporate Risk Profile Quantifying the Unquantifiable Benefits of ERM and Outcomes at Hydro One Conclusion Notes About the Authors Chapter 38 Enterprise Risk Management in the Public Sector: A First Look at the U.S. Department of Commerce Introduction Function of the Department's Risk Management Organization 1 Enterprise Risk Management at the Department of Commerce Attributes of an ERM Program: Using the SMART Goal System The Department of Commerce ERM as a Best Practice Conclusion Notes About the Author Chapter 39 A Review of Academic Research on Enterprise Risk Management Introduction Identification of Firms Implementing ERM Firm Characteristics Associated with ERM Implementation ERM and Firm Performance Case Studies on ERM Conclusion Notes References About the Authors Chapter 40 Lessons from the Academy: ERM Implementation in the University Setting The Higher Education Environment Emergence of ERM in Higher Education Adopting and Implementing ERM in Colleges and Universities The University of Washington: A Journey of Discovery Evolution of ERM at UW ERM Structure at UW President's Advisory Committee on ERM (PACERM) UW's ERM Model Outcomes and Lessons Learned What Next? Current Priorities and Future Direction Conclusion Notes References About the Author Chapter 41 Enterprise Risk Management: Lessons from the Field Introduction Lessons from the ERM Process Lessons from Integrating ERM with Ongoing Management Initiatives Some Key Value Lessons from ERM Conclusion Notes References Further Reading About the Authors Chapter 42 Financial Reporting and Disclosure Risk Management The Importance of Disclosure Management and ERM Foundations in the United States Disclosure and Sarbanes‐Oxley Important SOX Sections Other Financial Reporting Re‐examining Fair Value Accounting (ASC 820): The Debate Returns Risk Identification, Monitoring, and Reporting Financial Reporting Challenges Today Conclusion Notes References About the Author Chapter 43 Directors and Risk: Whither the Best Practices—Evidence from Canada Introduction Role of the Board of Directors and Directors in General Risk Management Methodology Results Discussion Conclusion Appendix 43.A References About the Authors Index EULA