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Fundamentals of Enterprise Risk Management, 2nd Edition

Book Description

One thing that will never change about the business world is the presence of risk. But risk management has changed dramatically since the 2008 financial crisis. . .and new developments in technology and communications demand up-to-the-minute approaches for defending against threats—and seizing opportunities.

Extensively updated, the second edition of Fundamentals of Enterprise Risk Management examines the latest technologies such as Riskonnect and High Tech Electronic Platform (HTEP), and helps readers recognize both internal and external exposures, understand crucial concepts such as risk mapping and risk identification, and align risk opportunities with their organization’s business model.

Packed with practical exercises and fresh case studies from organizations such as IBM, Microsoft, Apple, JPMorgan Chase,and Sony—as well as new material on topics including the new role of Risk Owner, cutting-edge collaboration methods, and the upside of risk—this critical guide provides readers with the tools and information they need to keep their organizations as blissfully risk-free as possible.

Table of Contents

  1. Cover
  2. Title
  3. Copyright
  4. Contents
  5. Introduction
  6. Part One. Essentials of Enterprise Risk Management
    1. 1. Hazard and Enterprise Risk Management
      1. Hurricane Andrew.
      2. Definitions of Risk.
      3. Hazard Risk.
      4. Insurable Risk.
      5. Traditional Risk Management.
      6. Severity and Frequency.
      7. Enterprise Risk.
      8. Operational Risk.
      9. Strategic Risk.
      10. Financial Risk.
      11. Conclusion.
    2. Appendix 1. Russian Frozen Chicken
    3. 2. Enterprise Risk Management
      1. ERM Defined.
      2. The Need for ERM.
      3. Conclusion.
    4. Appendix 2. GM, Ford, and the Chrysler Bailout
    5. 3. Contributions of ERM
      1. Contribution 1: Recognize the Upside of Risk.
      2. Contribution 2: Assign Risk Owners.
      3. Contribution 3: Align Risk Accountability.
      4. Contribution 4: Create a Central Risk Function.
      5. Contribution 5: Install a High-Tech Electronic Platform (HTEP).
      6. AIG’s View of Risk.
      7. Contribution 6: Involve the Board of Directors.
      8. Contribution 7: Employ a Standard Risk Evaluation Process.
      9. Conclusion.
    6. Appendix 3. Home Depot
    7. 4. Challenge of the Black Swan
      1. 2014 Atlanta Ice Storm.
      2. What Is a Black Swan?
      3. Blockbuster.
      4. Risk Experts.
      5. The Failure of Experts.
      6. The Perceived Level of Risk.
      7. Silent Evidence.
      8. Conclusion.
    8. 5. The 2008 Financial Crisis
      1. Speculative Frenzies.
      2. History of the Crisis.
      3. Scanning for Exposures.
      4. Visible Signs of Danger.
      5. Aftermath.
      6. Parallel with the Great Depression.
      7. Dodd–Frank Act.
      8. Conclusion.
    9. 6. Implementing ERM
      1. COSO Framework.
      2. COSO Structure.
      3. COSO Components.
      4. COSO Definitions.
      5. Approaches to ERM.
      6. Risk Management Areas.
      7. Strategies and Situations in Risk Management.
      8. Expanding the Scope of ERM.
      9. Benefits of ERM.
      10. Making ERM More Effective.
      11. Leadership Risk.
      12. ERM Premises.
      13. How Do We Start?
      14. High-Tech Electronic Platform (HTEP).
      15. Conclusion.
    10. Appendix 6. ISO 31000 Framework
  7. Part Two. Risk Management Technology
    1. 7. Risk Clusters
      1. Cluster Risk Structure.
      2. Sophisticated Risk Mapping.
      3. Clusters Versus Spreadsheets.
      4. Hierarchy of Subrisks.
      5. Interactions.
      6. Conclusion.
    2. 8. Risk Technology in 2008
      1. Rejection of Spreadsheets.
      2. High-Tech Electronic Platform (HTEP).
      3. Riskonnect HTEP.
      4. User Features.
      5. Design Features.
      6. Relationships.
      7. Risk Dashboards.
      8. Heat Map.
      9. CP&L ERM Implementation.
      10. Next Steps.
      11. Conclusion.
    3. 9. New Technology in 2014
      1. New York University HTEP.
      2. Mobile Devices.
      3. HTEP Links.
      4. Earthquake Notification.
      5. Southwest Airlines HTEP.
      6. Collaboration with Chatter.
      7. Real-Time Links to the World.
      8. Word Translation and Currency Translation.
      9. Data Resources.
      10. Managing a Disability Claim.
      11. Conclusion.
    4. 10. HTEP Applications
      1. Airbus A380 Jumbo Jet.
      2. HTEP Opportunity with Bananas.
      3. Tropical Storm Disruption.
      4. BP Oil Explosion.
      5. Ford Supply Chain.
      6. Dell Supply Chain.
      7. Chilean Mine Rescue.
      8. Conclusion.
    5. 11. Product Launch Application
      1. Market Risk.
      2. Product Risk.
      3. Capital Risk.
      4. Intellectual Property Risk.
      5. Risk Profile.
      6. Expanding the View.
      7. Conclusion.
  8. Part Three. Risks Without Risk Owners
    1. 12. Strategic Risk
      1. FedEx.
      2. Strategic Risk Management.
      3. Strategic Risk and Knowledge.
      4. Pursuit of Knowledge.
      5. Historical Perspective of Strategic Risk.
      6. Strategic Risk and Synergy.
      7. Strategic Risk and Tools of Knowledge.
      8. Strategic Risk and Opportunity Since 1980.
      9. Scanning Post-2014.
      10. Energy All by Itself.
      11. Boeing Versus Airbus.
      12. The Fax Machine and Strategic Risk.
      13. Conclusion.
    2. 13. Subculture Risk
      1. Ford-Toyota Rowing Contest.
      2. Subculture Risk.
      3. Bureaucracy as a Structure.
      4. Understanding Subculture Risk.
      5. Charles Handy on Culture.
      6. Bureaucracy Culture.
      7. Spider’s Web Culture.
      8. Team Culture.
      9. Individual Culture.
      10. Cultural Control and Effectiveness.
      11. Recognizing the Subculture.
      12. Conclusion.
    3. Appendix 13a. Characteristics to Identify Subcultures
    4. Appendix 13b. Subculture Risk in High School
    5. 14. Leadership Risk
      1. Behavioral Risk.
      2. Strategic and Situational Leadership.
      3. Situational Leadership Styles.
      4. Competence and Commitment.
      5. How Leaders Decide.
      6. IKEA Best Practices.
      7. High-Performance Leadership.
    6. 15. Life Cycle Risk
      1. Organizational Life Cycle.
      2. Sharing Life Cycle Information.
      3. Life Cycle Goals.
      4. Life Cycle Tactical Focus.
      5. Planning Horizons.
      6. Growth as a Risk Factor.
      7. Risks with Change.
      8. GM and Toyota Life Cycle Risk.
      9. ERM Implementation and Life Cycles.
      10. Funding for ERM.
      11. Priority for ERM.
      12. Politics of ERM.
      13. Conclusion.
    7. 16. IBM, Microsoft, and Apple
      1. IBM at Its Peak.
      2. IBM in Decline.
      3. IBM Resurgence.
      4. Microsoft Growth.
      5. Microsoft Peak.
      6. Microsoft Decline.
      7. Apple Rise.
      8. Apple Decline.
      9. Apple Rebound.
      10. Conclusion.
  9. Part Four. Special Topics
    1. 17. Cyber Risk Management
      1. Cyber Risk.
      2. Malicious Software.
      3. Loss Assessment.
      4. Managing Cyber Risks.
      5. Buying Cyber Risk Insurance.
      6. Incident Response Plan.
      7. Mafiaboy Attack.
      8. Sony PlayStation Attack.
      9. Hacker Language.
      10. WikiLeaks 2010 Leak.
      11. Authorized User Exposure.
      12. Hackers and Cyber Risk.
      13. Anonymous.
      14. Arab Spring.
      15. Bay Area Rapid Transit (BART).
      16. Megaupload.
      17. Responding to Anonymous Threats.
      18. Conclusion.
    2. 18. Collaboration for Effective Risk Management
      1. Collaboration.
      2. Grocery Acquisition.
      3. Wikipedia Accuracy.
      4. Swarm Theory.
      5. GoldCorp Collaboration.
    3. 19. Cerberus, JPMorgan, and Lehman
      1. Cerberus and Chrysler.
      2. JPMorgan Chase and Derivatives.
      3. Lehman Toxic Assets.
    4. 20. Rise of Modern Risk Management
      1. Risk Management Supersedes Insurance.
      2. Formation of Captives to Retain Risks.
      3. Risk Management Addresses Liability.
      4. Decline of Historical Data.
      5. Performance Risk Augments Hazard Risk.
      6. ERM and Cyber Risk.
      7. War Risk.
      8. Outlaw Environments.
      9. Environmental Risks.
      10. Conclusion.
    5. 21. Evolving ERM
      1. Four Problems for ERM.
      2. Black Swan.
      3. Long-Term Capital Management.
      4. Speeding Up the Implementation of ERM.
      5. The Future of ERM.
      6. Conclusion.
    6. 22. Modern Risk Managers
      1. Risk Manager Roles.
      2. Risk Manager Levels.
      3. Profiles of Risk Managers.
      4. Areas of Attention.
      5. Chief Risk Officer.
      6. Chief Strategy Officer (CSO).
      7. CRO and CSO Areas of Focus.
      8. Paul Buckley, Tyco Risk Manager.
      9. Chris Mandel, USAA Risk Manager.
      10. Lance Ewing, Harrah’s Risk Manager.
      11. George Niwa, Panasonic Risk Manager.
      12. Susan Meltzer, Aviva Risk Manager.
      13. Central Risk Management Committee.
  10. Denouement
  11. Index