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by Betty Simkins, John Fraser
Enterprise Risk Management
Cover
Series
Title
Copyright
Foreword
PART I: Overview
CHAPTER 1: Enterprise Risk Management: An Introduction and Overview
WHAT IS ENTERPRISE RISK MANAGEMENT?
DRIVERS OF ENTERPRISE RISK MANAGEMENT
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
NOTES
ABOUT THE AUTHOR
CHAPTER 3: ERM and Its Role in Strategic Planning and Strategy Execution
RISING EXPECTATIONS FOR STRATEGIC RISK MANAGEMENT
INTEGRATING RISK INTO STRATEGIC PLANNING
CREATING A STRATEGIC RISK MINDSET AND CULTURE
BUILDING A STRATEGIC RISK ASSESSMENT PROCESS
CONCLUSION
NOTES
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
CONCLUSION
NOTES
PART II: ERM Management, Culture, and Control
CHAPTER 5: 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
NOTES
REFERENCES
ACKNOWLEDGMENTS
ABOUT THE AUTHOR
CHAPTER 6: Creating a Risk-Aware Culture
THE IMPORTANCE OF CULTURE
ELEMENTS OF A RISK-AWARE CULTURE
HOW TO CREATE A RISK-AWARE CULTURE
WHAT DOES RISK MANAGEMENT HAVE TO DO?
CONCLUSION
REFERENCES
ABOUT THE AUTHOR
CHAPTER 7: ERM Frameworks
INTRODUCTION
ELEMENTS OF AN ERM FRAMEWORK
RISK MANAGEMENT PROCESS (RMP)
MANDATE AND COMMITMENT TO THE ERM FRAMEWORK
RISK MANAGEMENT POLICY
INTEGRATION OF RISK MANAGEMENT AND RESOURCES FOR ERM
COMMUNICATIONS, CONSULTATION, AND REPORTING
ACCOUNTABILITY
CONTINUOUS IMPROVEMENT
CONCLUSION
REFERENCES
ABOUT THE AUTHOR
CHAPTER 8: Identifying and Communicating Key Risk Indicators
INTRODUCTION
WHAT IS A KEY RISK INDICATOR?
PRACTICAL APPLICATIONS
VALUE OF KRIs TO RISK MANAGEMENT
DESIGN PRINCIPLES
IMPLEMENTATION CONSIDERATIONS
CONCLUSION
NOTE
ACKNOWLEDGMENT
ABOUT THE AUTHOR
PART III: ERM Tools and Techniques
CHAPTER 9: How to Create and Use Corporate Risk Tolerance
INTRODUCTION
WHAT IS RISK TOLERANCE?
WHY IS SETTING RISK TOLERANCE IMPORTANT?
WHAT ARE THE FACTORS TO CONSIDER IN SETTING RISK TOLERANCE?
HOW CAN YOUR ORGANIZATION MAKE RISK TOLERANCE USEFUL IN MANAGING RISK?
CONCLUSION
NOTES
ABOUT THE AUTHORS
CHAPTER 10: How to Plan and Run a Risk Management Workshop
INTRODUCTION
WHAT IS A RISK WORKSHOP?
WHY USE WORKSHOPS?
HOW TO CONDUCT A RISK WORKSHOP
PREPARATION
EXECUTION
TECHNIQUES FOR PLANNING AND FACILITATING EFFECTIVE RISK WORKSHOPS
CONCLUSION
ABOUT THE AUTHOR
CHAPTER 11: How to Prepare a Risk Profile
INTRODUCTION
DEFINITION AND USES OF A CORPORATE RISK PROFILE
COMMON TYPES OF CORPORATE RISK PROFILES
ADVANTAGES AND DISADVANTAGES OF INFORMATION-GATHERING METHODOLOGIES
HOW TO PREPARE A “TOP 10” RISK PROFILE—HYDRO ONE’S EXPERIENCE
CONCLUSION
NOTES
REFERENCES
ABOUT THE AUTHOR
CHAPTER 12: 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 13: 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
PART IV: Types of Risk
CHAPTER 14: 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 15: Credit Risk Management
CREDIT RISK ANALYSIS
AN ANALYSIS OF THE CREDIT CRISIS
CONCLUSION
NOTES
REFERENCES
ABOUT THE AUTHOR
CHAPTER 16: 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 17: Risk Management: Techniques in Search of a Strategy
INTRODUCTION
CURRENT SITUATION
RISK STRATEGY FRAMEWORK
GOVERNANCE
NEW DIRECTIONS
CONCLUSION
NOTES
REFERENCES
ABOUT THE AUTHOR
CHAPTER 18: 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?
NOTES
REFERENCES
ABOUT THE AUTHOR
CHAPTER 19: Bank Capital Regulation and Enterprise Risk Management
INTRODUCTION
THE EVOLUTION OF BANK CAPITAL REQUIREMENTS
CONCLUSION
NOTES
REFERENCES
ABOUT THE AUTHOR
CHAPTER 20: Legal Risk Post-SOX and the Subprime Fiasco: Back to the Drawing Board
INTRODUCTION
THE LEGAL FRAMEWORK OF LEGAL AND REPUTATIONAL RISK MANAGEMENT
AN ASSESSMENT OF THE SOX FRAMEWORK ON LEGAL AND REPUTATIONAL RISK
TOWARD OPTIMAL REPUTATIONAL AND LEGAL RISK MANAGEMENT
CONCLUSION
NOTE
REFERENCES
ABOUT THE AUTHOR
CHAPTER 21: 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
RISK IDENTIFICATION, MONITORING, AND REPORTING
FINANCIAL REPORTING CHALLENGES TODAY
CONCLUSION
NOTES
REFERENCES
ABOUT THE AUTHOR
PART V: Survey Evidence and Academic Research
CHAPTER 22: Who Reads What Most Often?: A Survey of Enterprise Risk Management Literature Read by Risk Executives
INTRODUCTION
SURVEY METHODOLOGY
SURVEY RESULTS
CONCLUSION
APPENDIX 22.A: PUBLICATIONS INCLUDED IN THE SURVEY
APPENDIX 22.B: SURVEY RESPONDENTS WHO GAVE PERMISSION TO BE IDENTIFIED
NOTES
REFERENCES
ABOUT THE AUTHORS
CHAPTER 23: Academic Research on Enterprise Risk Management
INTRODUCTION
ACADEMIC RESEARCH ON ENTERPRISE RISK MANAGEMENT
CASE STUDIES ON ERM
CONCLUSION
NOTES
REFERENCES
ABOUT THE AUTHORS
CHAPTER 24: 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
PART VI: Special Topics and Case Studies
CHAPTER 25: Rating Agencies’ Impact on Enterprise Risk Management
INTRODUCTION
BANKING: GENERAL
INSURANCE: S&P
INSURANCE: MOODY’S
INSURANCE: FITCH
INSURANCE: A.M. BEST
U.S. ENERGY COMPANIES: S&P
NONFINANCIAL COMPANIES: S&P
A FLY IN THE OINTMENT
CONCLUSION
NOTES
FURTHER READING
ABOUT THE AUTHOR
CHAPTER 26: Enterprise Risk Management: Current Initiatives and Issues
QUESTION 1
QUESTION 2
QUESTION 3
QUESTION 4
QUESTION 5
QUESTION 6
QUESTION 7
QUESTION 8
NOTES
CHAPTER 27: Establishing ERM Systems in Emerging Countries
INTRODUCTION
ENTERPRISE RISK MANAGEMENT AND ITS BENEFITS IN EMERGING MARKETS
OBSERVATIONS OF ERM PRACTICES IN EMERGING COUNTRIES
CONCLUSION
APPENDIX: COSO APPROACH TO ENTERPRISE RISK MANAGEMENT
NOTES
REFERENCES
ABOUT THE AUTHOR
CHAPTER 28: The Rise and Evolution of the Chief Risk Officer: Enterprise Risk Management at Hydro One
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
Index
End User License Agreement
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Prev
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Series
Table of Contents
Cover
Series
Title
Copyright
Foreword
PART I: Overview
CHAPTER 1: Enterprise Risk Management: An Introduction and Overview
WHAT IS ENTERPRISE RISK MANAGEMENT?
DRIVERS OF ENTERPRISE RISK MANAGEMENT
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
NOTES
ABOUT THE AUTHOR
CHAPTER 3: ERM and Its Role in Strategic Planning and Strategy Execution
RISING EXPECTATIONS FOR STRATEGIC RISK MANAGEMENT
INTEGRATING RISK INTO STRATEGIC PLANNING
CREATING A STRATEGIC RISK MINDSET AND CULTURE
BUILDING A STRATEGIC RISK ASSESSMENT PROCESS
CONCLUSION
NOTES
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
CONCLUSION
NOTES
PART II: ERM Management, Culture, and Control
CHAPTER 5: 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
NOTES
REFERENCES
ACKNOWLEDGMENTS
ABOUT THE AUTHOR
CHAPTER 6: Creating a Risk-Aware Culture
THE IMPORTANCE OF CULTURE
ELEMENTS OF A RISK-AWARE CULTURE
HOW TO CREATE A RISK-AWARE CULTURE
WHAT DOES RISK MANAGEMENT HAVE TO DO?
CONCLUSION
REFERENCES
ABOUT THE AUTHOR
CHAPTER 7: ERM Frameworks
INTRODUCTION
ELEMENTS OF AN ERM FRAMEWORK
RISK MANAGEMENT PROCESS (RMP)
MANDATE AND COMMITMENT TO THE ERM FRAMEWORK
RISK MANAGEMENT POLICY
INTEGRATION OF RISK MANAGEMENT AND RESOURCES FOR ERM
COMMUNICATIONS, CONSULTATION, AND REPORTING
ACCOUNTABILITY
CONTINUOUS IMPROVEMENT
CONCLUSION
REFERENCES
ABOUT THE AUTHOR
CHAPTER 8: Identifying and Communicating Key Risk Indicators
INTRODUCTION
WHAT IS A KEY RISK INDICATOR?
PRACTICAL APPLICATIONS
VALUE OF KRIs TO RISK MANAGEMENT
DESIGN PRINCIPLES
IMPLEMENTATION CONSIDERATIONS
CONCLUSION
NOTE
ACKNOWLEDGMENT
ABOUT THE AUTHOR
PART III: ERM Tools and Techniques
CHAPTER 9: How to Create and Use Corporate Risk Tolerance
INTRODUCTION
WHAT IS RISK TOLERANCE?
WHY IS SETTING RISK TOLERANCE IMPORTANT?
WHAT ARE THE FACTORS TO CONSIDER IN SETTING RISK TOLERANCE?
HOW CAN YOUR ORGANIZATION MAKE RISK TOLERANCE USEFUL IN MANAGING RISK?
CONCLUSION
NOTES
ABOUT THE AUTHORS
CHAPTER 10: How to Plan and Run a Risk Management Workshop
INTRODUCTION
WHAT IS A RISK WORKSHOP?
WHY USE WORKSHOPS?
HOW TO CONDUCT A RISK WORKSHOP
PREPARATION
EXECUTION
TECHNIQUES FOR PLANNING AND FACILITATING EFFECTIVE RISK WORKSHOPS
CONCLUSION
ABOUT THE AUTHOR
CHAPTER 11: How to Prepare a Risk Profile
INTRODUCTION
DEFINITION AND USES OF A CORPORATE RISK PROFILE
COMMON TYPES OF CORPORATE RISK PROFILES
ADVANTAGES AND DISADVANTAGES OF INFORMATION-GATHERING METHODOLOGIES
HOW TO PREPARE A “TOP 10” RISK PROFILE—HYDRO ONE’S EXPERIENCE
CONCLUSION
NOTES
REFERENCES
ABOUT THE AUTHOR
CHAPTER 12: 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 13: 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
PART IV: Types of Risk
CHAPTER 14: 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 15: Credit Risk Management
CREDIT RISK ANALYSIS
AN ANALYSIS OF THE CREDIT CRISIS
CONCLUSION
NOTES
REFERENCES
ABOUT THE AUTHOR
CHAPTER 16: 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 17: Risk Management: Techniques in Search of a Strategy
INTRODUCTION
CURRENT SITUATION
RISK STRATEGY FRAMEWORK
GOVERNANCE
NEW DIRECTIONS
CONCLUSION
NOTES
REFERENCES
ABOUT THE AUTHOR
CHAPTER 18: 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?
NOTES
REFERENCES
ABOUT THE AUTHOR
CHAPTER 19: Bank Capital Regulation and Enterprise Risk Management
INTRODUCTION
THE EVOLUTION OF BANK CAPITAL REQUIREMENTS
CONCLUSION
NOTES
REFERENCES
ABOUT THE AUTHOR
CHAPTER 20: Legal Risk Post-SOX and the Subprime Fiasco: Back to the Drawing Board
INTRODUCTION
THE LEGAL FRAMEWORK OF LEGAL AND REPUTATIONAL RISK MANAGEMENT
AN ASSESSMENT OF THE SOX FRAMEWORK ON LEGAL AND REPUTATIONAL RISK
TOWARD OPTIMAL REPUTATIONAL AND LEGAL RISK MANAGEMENT
CONCLUSION
NOTE
REFERENCES
ABOUT THE AUTHOR
CHAPTER 21: 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
RISK IDENTIFICATION, MONITORING, AND REPORTING
FINANCIAL REPORTING CHALLENGES TODAY
CONCLUSION
NOTES
REFERENCES
ABOUT THE AUTHOR
PART V: Survey Evidence and Academic Research
CHAPTER 22: Who Reads What Most Often?: A Survey of Enterprise Risk Management Literature Read by Risk Executives
INTRODUCTION
SURVEY METHODOLOGY
SURVEY RESULTS
CONCLUSION
APPENDIX 22.A: PUBLICATIONS INCLUDED IN THE SURVEY
APPENDIX 22.B: SURVEY RESPONDENTS WHO GAVE PERMISSION TO BE IDENTIFIED
NOTES
REFERENCES
ABOUT THE AUTHORS
CHAPTER 23: Academic Research on Enterprise Risk Management
INTRODUCTION
ACADEMIC RESEARCH ON ENTERPRISE RISK MANAGEMENT
CASE STUDIES ON ERM
CONCLUSION
NOTES
REFERENCES
ABOUT THE AUTHORS
CHAPTER 24: 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
PART VI: Special Topics and Case Studies
CHAPTER 25: Rating Agencies’ Impact on Enterprise Risk Management
INTRODUCTION
BANKING: GENERAL
INSURANCE: S&P
INSURANCE: MOODY’S
INSURANCE: FITCH
INSURANCE: A.M. BEST
U.S. ENERGY COMPANIES: S&P
NONFINANCIAL COMPANIES: S&P
A FLY IN THE OINTMENT
CONCLUSION
NOTES
FURTHER READING
ABOUT THE AUTHOR
CHAPTER 26: Enterprise Risk Management: Current Initiatives and Issues
QUESTION 1
QUESTION 2
QUESTION 3
QUESTION 4
QUESTION 5
QUESTION 6
QUESTION 7
QUESTION 8
NOTES
CHAPTER 27: Establishing ERM Systems in Emerging Countries
INTRODUCTION
ENTERPRISE RISK MANAGEMENT AND ITS BENEFITS IN EMERGING MARKETS
OBSERVATIONS OF ERM PRACTICES IN EMERGING COUNTRIES
CONCLUSION
APPENDIX: COSO APPROACH TO ENTERPRISE RISK MANAGEMENT
NOTES
REFERENCES
ABOUT THE AUTHOR
CHAPTER 28: The Rise and Evolution of the Chief Risk Officer: Enterprise Risk Management at Hydro One
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
Index
End User License Agreement
List of Illustrations
CHAPTER 12: How to Allocate Resources Based on Risk
Appendix 12.A
BCTC Corporable Risk Matrix
List of Tables
CHAPTER 5: Becoming the Lamp Bearer: The Emerging Roles of the Chief Risk Officer
Exhibit 5.1
Summary of the Business-Partner Roles of the CRO
CHAPTER 7: ERM Frameworks
Exhibit 7.1
An ISO 31000 Compatible Framework for Implementing ERM Including the Risk Management Process
CHAPTER 8: Identifying and Communicating Key Risk Indicators
Exhibit 8.1
Examples of KRIs
Exhibit 8.2
KRIs at Different Levels of Granularity
Exhibit 8.3
KRIs Are Linked to Risk, Performance, and Strategy
Exhibit 8.4
KRI Is a Component of a Larger Risk Assessment Process
Exhibit 8.5
KRIs Help to Clarify Risk-Taking Expectations
Exhibit 8.6
KRIs Provide Tangible Measures to Trigger Action
Exhibit 8.7
Sources of Information to Designing KRIs
Exhibit 8.8
Accountability for KRIs
CHAPTER 9: How to Create and Use Corporate Risk Tolerance
Exhibit 9.1
Private-Sector Organization versus Public-Sector Organization
Exhibit 9.2
Risks for Private-Sector versus Public-Sector Organizations
CHAPTER 10: How to Plan and Run a Risk Management Workshop
Exhibit 10.1
How to Conduct a Risk Workshop
Exhibit 10.2
Setting Workshop Objectives
Exhibit 10.3
Sample Risk Magnitude Scale
Exhibit 10.4
Sample Probability Scale
Exhibit 10.5
Sample “Strength of Mitigants” Scale
Exhibit 10.6
Sample Record-Keeping Template
CHAPTER 11: How to Prepare a Risk Profile
Exhibit 11.1
Risk Map—December 2006
Exhibit 11.2
Heat Map
Exhibit 11.3
Risk Information Gathering Alternatives
Exhibit 11.4
Risk Profile—Interview Sheet
Exhibit 11.5
Risk Profile Matrix
Exhibit 11.6
The Evolution of Asset Risks
CHAPTER 12: How to Allocate Resources Based on Risk
Exhibit 12.1
Major Business Frameworks for Achieving Business Objectives
Exhibit 12.2
SBO/KPI/RT Hierarchy
Exhibit 12.3
Strategic Business Objectives and Key Performance Indicator Relationship
Exhibit 12.4
Key Performance Indicators and Risk Tolerance Relationships
Exhibit 12.5
Key Performance Indicator/Planning Indicator/Risk Tolerance Relationship
Exhibit 12.6
Representative Categories and Probability Levels for Assigning Probabilities to Risk Events
Exhibit 12.7
Risk Space Concept for Identifying Business Risks
Exhibit 12.8
Key Process Steps of the RFRAF
Exhibit 12.9
Key Elements and Products of the Risk-Based Business Processes
Exhibit 12.10
Business Functions Typically Involved in Business Planning and Risk Assessments
Exhibit 12.11
Time Frames and Information Contributions to Risk Assessments
Exhibit 12.12
Graphical Representation of Prioritization Model Output
CHAPTER 13: Quantitative Risk Assessment in ERM
Exhibit 13.1
Impact Range Probability Distribution
Exhibit 13.2
Methods of Quantifying Risk
Exhibit 13.3
An Example of a Two-Dimensional Risk Map
Exhibit 13.4
An Example of a Probability Scale
Exhibit 13.5
An Example of an Impact Scale
Exhibit 13.6.A
Adding Expected Losses
Exhibit 13.6.B
Calculating the Distribution of Combined Impacts
Exhibit 13.7
Medium-Term Total Corporate Risk of a Housing Association (Prior to Risk-Management Actions)
CHAPTER 14: Market Risk Management and Common Elements with Credit Risk Management
Exhibit 14.1
Histogram of Potential Earnings
Exhibit 14.2
Comparison of Spot, Forward, and Option Hedging Strategies
CHAPTER 15: Credit Risk Management
Exhibit 15.1
Recovery Rates on Corporate Bonds as a Percentage of Face Value 1982–2003
Exhibit 15.2
One-Year Transition Matrix—Percentages Moody’s 1970–2006
Exhibit 15.3
Structure of a CDO
CHAPTER 16: Operational Risk Management
Exhibit 16.1
Where the Performance Goes
Exhibit 16.2
The Bowtie Model
Exhibit 16.3
Examples of the Relationship Between a Risk Factor, Risk Event, and Consequence
Exhibit 16.4
Bowtie Example
Exhibit 16.5
Risk Treatment Selection Criteria
Exhibit 16.6
Alignment Between Enterprise and Operational Risk Management
CHAPTER 17: Risk Management: Techniques in Search of a Strategy
Exhibit 17.1
Value Implications of Risk Appetite Changes
Exhibit 17.2
Gross Leverage Levels (Total assets divided by total shareholders’ equity)
Exhibit 17.3
Drivers of Risk Management Strategy
Exhibit 17.4
Risk Appetite Continuum
Exhibit 17.5
Risk Appetite and Value Creation
Exhibit 17.6
Asset Price Liquidity
Exhibit 17.7
DAR Control Framework
Exhibit 17.8
Firm and Its Environment
Exhibit 17.9
Adaptive Risk Management
CHAPTER 18: Managing Financial Risk and Its Interaction with Enterprise Risk Management
Exhibit 18.1
Examples of Contracts Traded at Major U.S. Futures Exchanges
CHAPTER 19: Bank Capital Regulation and Enterprise Risk Management
Exhibit 19.1
U.S. Bank Equity/Asset Ratios
Exhibit 19.2
Basel II - Minimum Capital for a $100 Commercial Loan
Exhibit 19.3
Regulatory Arbitrage: Two Loans for $1 Million Each
Exhibit 19.4
Economic Capital
CHAPTER 21: Financial Reporting and Disclosure Risk Management
Exhibit 21.1
Recent Firm Failures and Disclosure Management
Exhibit 21.2
ERM Dashboard
CHAPTER 22: Who Reads What Most Often?: A Survey of Enterprise Risk Management Literature Read by Risk Executives
Exhibit 22.1
Industry Affiliation of Survey Respondents
This graphic lists the number of firms and the percentage of total firms by industry that responded to the survey.
Exhibit 22.2
Experience with Enterprise Risk Management
Exhibit 22.3
Drivers for Implementing Enterprise Risk Management
Exhibit 22.4
Extent of Following COSO’s ERM Recommended Tools and Techniques This graph lists the responses to the question: To what extent do you follow COSO’s ERM recommended tools and techniques?
Exhibit 22.5
Usefulness of Sources of Best Practices and Methodology for ERM
This graph lists the mean response rating to the question: How useful are the following sources of best practices and methodology for ERM? Ratings response categories were: 1=Seldom, 2=Fair/Occasional, 3=Good/Frequent, and 4=As much as Possible.
Exhibit 22.6
Mean Ratings of Publications Used in Survey
Exhibit 22.7
Top 10 Articles
Exhibit 22.8
Top 10 Books
Exhibit 22.9
Top 11 Research Reports
Exhibit 22.10
Other Useful Literature for the Implementation of ERM Not Included in the Survey
CHAPTER 23: Academic Research on Enterprise Risk Management
Exhibit 23.1
Academic Research on Entreprise Risk Management-Research Articles
Exhibit 23.2
Academic Research on Enterprise Risk Management—Case Studies
CHAPTER 24: Enterprise Risk Management: Lessons from the Field
Exhibit 24.1
Business Risk Model—A common Language
Exhibit 24.2
Industry Risk Portfolio
Exhibit 24.3
Qualitative and Quantitative Approaches to Assessment and Measurement
Exhibit 24.4
Risk Map
Exhibit 24.5
Risk Map
Exhibit 24.6
Strategy, the Balanced Scorecard, and the Budget
Exhibit 24.7
Risk Management in Acquisitions
Exhibit 24.8
Balanced Scorecard and Strategic Risk Assessment
Exhibit 24.9
Corporate Governance and ERM
CHAPTER 26: Enterprise Risk Management: Current Initiatives and Issues
Exhibit 26.1
The Four Pillars of BU NA’s ERM Program
CHAPTER 27: Establishing ERM Systems in Emerging Countries
Exhibit 27.1
Patterns of Systemic Banking Crises
Exhibit 27.2
Comparative Review of Risk Management Applications Using COSO Model in Select Emerging Countries
CHAPTER 28: The Rise and Evolution of the Chief Risk Officer: Enterprise Risk Management at Hydro One
Exhibit 28.1
Risk Management Process
Exhibit 28.2
Risk Tolerances
Exhibit 28.3
Probability Rating Scale
Exhibit 28.4
Risk Map
Exhibit 28.5
Corporate Risk Profile
Exhibit 28.6
A Risk-Based Structural Approach to Investment Planning at Hydro One
Exhibit 28.7
Benefits of ERM and Outcomes at Hydro One
Guide
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