Fundamentals of Enterprise Risk Management

How Top Companies Assess Risk, Manage Exposure, and Seize Opportunity

 Fundamentals of Enterprise Risk Management

Author: John J. Hampton
Pub Date: December 2014
Print Edition: $79.95
Print ISBN: 9780814449035
Page Count: 320
Format: Hardback
Edition: Second Edition
e-Book ISBN: 9780814449042

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Table of Contents

CONTENTS

Introduction xi

Part One. Essentials of Enterprise Risk Management 1

1. Hazard and Enterprise Risk Management 3

Hurricane Andrew. Definitions of Risk. Hazard Risk. Insurable

Risk. Traditional Risk Management. Severity and Frequency.

Enterprise Risk. Operational Risk. Strategic Risk. Financial Risk.

Conclusion.

Appendix 1. Russian Frozen Chicken 15

2. Enterprise Risk Management 18

ERM Defined. The Need for ERM. Conclusion.

Appendix 2. GM, Ford, and the Chrysler Bailout 25

3. Contributions of ERM 30

Contribution 1: Recognize the Upside of Risk. Contribution 2:

Assign Risk Owners. Contribution 3: Align Risk Accountability.

Contribution 4: Create a Central Risk Function. Contribution 5:

Install a High-Tech Electronic Platform (HTEP). AIG’s View of Risk.

Contribution 6: Involve the Board of Directors. Contribution 7:

Employ a Standard Risk Evaluation Process. Conclusion.

Appendix 3. Home Depot 40

4. Challenge of the Black Swan 45

2014 Atlanta Ice Storm. What Is a Black Swan? Blockbuster. Risk

Experts. The Failure of Experts. The Perceived Level of Risk.

Silent Evidence. Conclusion.

5. The 2008 Financial Crisis 57

Speculative Frenzies. History of the Crisis. Scanning for

Exposures. Visible Signs of Danger. Aftermath. Parallel with the

Great Depression. Dodd–Frank Act. Conclusion.

6. Implementing ERM 69

COSO Framework. COSO Structure. COSO Components. COSO

Definitions. Approaches to ERM. Risk Management Areas.

Strategies and Situations in Risk Management. Expanding the

Scope of ERM. Benefits of ERM. Making ERM More Effective.

Leadership Risk. ERM Premises. How Do We Start? High-Tech

Electronic Platform (HTEP). Conclusion.

Appendix 6. ISO 31000 Framework 82

Part Two. Risk Management Technology 85

7. Risk Clusters 87

Cluster Risk Structure. Sophisticated Risk Mapping. Clusters

Versus Spreadsheets. Hierarchy of Subrisks. Interactions.

Conclusion.

8. Risk Technology in 2008 95

Rejection of Spreadsheets. High-Tech Electronic Platform (HTEP).

Riskonnect HTEP. User Features. Design Features. Relationships.

Risk Dashboards. Heat Map. CP&L ERM Implementation. Next

Steps. Conclusion.

9. New Technology in 2014 113

New York University HTEP. Mobile Devices. HTEP Links.

Earthquake Notification. Southwest Airlines HTEP. Collaboration

with Chatter. Real-Time Links to the World. Word Translation and

Currency Translation. Data Resources. Managing a Disability

Claim. Conclusion.

10. HTEP Applications 126

Airbus A380 Jumbo Jet. HTEP Opportunity with Bananas. Tropical

Storm Disruption. BP Oil Explosion. Ford Supply Chain. Dell

Supply Chain. Chilean Mine Rescue. Conclusion.

11. Product Launch Application 139

Market Risk. Product Risk. Capital Risk. Intellectual Property

Risk. Risk Profile. Expanding the View. Conclusion.

Part Three. Risks Without Risk Owners 147

12. Strategic Risk 149

FedEx. Strategic Risk Management. Strategic Risk and

Knowledge. Pursuit of Knowledge. Historical Perspective of

Strategic Risk. Strategic Risk and Synergy. Strategic Risk and

Tools of Knowledge. Strategic Risk and Opportunity Since 1980.

Scanning Post-2014. Energy All by Itself. Boeing Versus Airbus.

The Fax Machine and Strategic Risk. Conclusion.

13. Subculture Risk 171

Ford-Toyota Rowing Contest. Subculture Risk. Bureaucracy as a

Structure. Understanding Subculture Risk. Charles Handy on

Culture. Bureaucracy Culture. Spider’s Web Culture. Team

Culture. Individual Culture. Cultural Control and Effectiveness.

Recognizing the Subculture. Conclusion.

Appendix 13a. Characteristics to Identify Subcultures 184

Appendix 13b. Subculture Risk in High School 186

14. Leadership Risk 192

Behavioral Risk. Strategic and Situational Leadership. Situational

Leadership Styles. Competence and Commitment. How Leaders

Decide. IKEA Best Practices. High-Performance Leadership.

15. Life Cycle Risk 205

Organizational Life Cycle. Sharing Life Cycle Information. Life

Cycle Goals. Life Cycle Tactical Focus. Planning Horizons. Growth

as a Risk Factor. Risks with Change. GM and Toyota Life Cycle

Risk. ERM Implementation and Life Cycles. Funding for ERM.

Priority for ERM. Politics of ERM. Conclusion.

16. IBM, Microsoft, and Apple 215

IBM at Its Peak. IBM in Decline. IBM Resurgence. Microsoft

Growth. Microsoft Peak. Microsoft Decline. Apple Rise. Apple

Decline. Apple Rebound. Conclusion.

Part Four. Special Topics 225

17. Cyber Risk Management 227

Cyber Risk. Malicious Software. Loss Assessment. Managing

Cyber Risks. Buying Cyber Risk Insurance. Incident Response

Plan. Mafiaboy Attack. Sony PlayStation Attack. Hacker Language.

WikiLeaks 2010 Leak. Authorized User Exposure. Hackers and

Cyber Risk. Anonymous. Arab Spring. Bay Area Rapid

Transportation (BART). Megaupload. Responding to Anonymous

Threats. Conclusion.

18. Collaboration for Effective Risk Management 249

Collaboration. Grocery Acquisition. Wikipedia Accuracy. Swarm

Theory. GoldCorp Collaboration.

19. Cerberus, JPMorgan, and Lehman 255

Cerberus and Chrysler. JPMorgan Chase and Derivatives. Lehman

Toxic Assets.

20. Rise of Modern Risk Management 262

Risk Management Supersedes Insurance. Formation of Captives

to Retain Risks. Risk Management Addresses Liability. Decline of

Historical Data. Performance Risk Augments Hazard Risk. ERM

and Cyber Risk. War Risk. Outlaw Environments. Environmental

Risks. Conclusion.

21. Evolving ERM 266

Four Problems for ERM. Black Swan. Long-Term Capital

Management. Speeding Up the Implementation of ERM. The

Future of ERM. Conclusion.

22. Modern Risk Managers 275

Risk Manager Roles. Risk Manager Levels. Profiles of Risk

Managers. Areas of Attention. Chief Risk Officer. Chief Strategy

Officer (CSO). CRO and CSO Areas of Focus. Paul Buckley, Tyco

Risk Manager. Chris Mandel, USAA Risk Manager. Lance Ewing,

Harrah’s Risk Manager. George Niwa, Panasonic Risk Manager.

Susan Meltzer, Aviva Risk Manager. Central Risk Management

Committee.

Denouement 285

Index 287

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