Preface xiii
Acknowledgments xvii
Section One Risk Mangement in Context 1
Chapter 1 Introduction 3
The Benefits of Risk Management 6
Integration Adds Value 9
Cautionary Tales 12
Chapter 2 Lessons Learned 21
Lesson #1: Know Your Business 23
Lesson #2: Establish Checks and Balances 24
Lesson #3: Set Limits and Boundaries 25
Lesson #4: Keep Your Eye on the Cash 26
Lesson #5: Use the Right Yardstick 27
Lesson #6: Pay for the Performance You Want 27
Lesson #7: Balance the Yin and the Yang 28
Chapter 3 Concepts and Processes 31
Risk Concepts 32
Risk Processes 36
Risk Awareness 38
Risk Measurement 40
Risk Control 42
Risk is a Bell Curve 48
Chapter 4 What is ERM? 51
ERM Definitions 53
The Benefits of ERM 53
The Chief Risk Officer 57
Components of ERM 61
Section Two The Enterprise Risk Management Framework 67
Chapter 5 Corporate Governance 69
Codes of Conduct 71
Best Practices 72
Linking Corporate Governance and ERM 77
Chapter 6 Line Management 83
The Relationship Between Line and Risk Functions 84
Key Challenges 89
Best Practices 92
Chapter 7 Portfolio Management 99
The Theory of Active Portfolio Management 100
Benefits of Active Portfolio Management 102
Practical Applications of Portfolio Management 105
Chapter 8 Risk Transfer 111
A Brief History of ART 112
Advantages of ART 116
Pitfalls of ART 119
A Look to the Future 122
Case Study: Honeywell 124
Case Study: Barclays 124
Chapter 9 Risk Analytics 127
Risk Control Analytics 128
Risk Optimization Analytics 133
Market Risk Analytics 135
Credit Risk Analytics 138
Credit Portfolio Models 141
Operational Risk Analytics 142
GRC Systems 143
Chapter 10 Data and Technology 147
Early Systems 147
Data Management 149
Interface Building 151
Middleware 152
Distributed Architectures 153
Key Factors for a Successful Implementation 154
Chapter 11 Stakeholder Management 157
Employees 158
Customers 161
Regulators 164
Rating Agencies 166
Shareholder Service Providers 167
Business Partners 169
Section Three Risk Management Applications 173
Chapter 12 Credit Risk Management 175
Key Credit Risk Concepts 176
The Credit Risk Management Process 184
Basel Requirements 192
Best Practices in Credit Risk Management 196
Case Study: Export Development Corporation (EDC) 200
Chapter 13 Market Risk Management 209
Types of Market Risk 210
Market Risk Measurement 211
Market Risk Management 224
Best Practices in Market Risk Management 227
Case Study: Market Risk Management at Chase 230
Chapter 14 Operational Risk Management 237
Operational Riskâ"Definition and Scope 240
The Operational Risk Management Process 246
Best Practice in Operational Risk Management 257
Emerging IT Risks 259
Case Study: Heller Financial 264
Chapter 15 Business Applications 271
Stage I: Minimizing the Downside 271
Stage II: Managing Uncertainty 272
Stage III: Performance Optimization 274
The Further Evolution of Risk Management 275
Chapter 16 Financial Institutions 277
Industry Trends 278
Risk Management Requirements 283
Systemic Risk 287
A Look to the Future 289
Case Study: CIBC 292
Chapter 17 Energy Firms 297
Industry Trends 298
Risk Management Requirements 301
A Look to the Future 310
Lessons Learned from Enron 313
Lessons Learned from the BP Oil Spill 314
Chapter 18 Non-Financial Corporations 317
Risk Management Requirements 317
Best Practices in Corporate Risk Management 326
Case Study: Microsoft 333
Case Study: Ford 335
Case Study: Airbus and Boeing 336
Section Four A Look to the Future 339
Chapter 19 Predictions 341
The Profession of Risk Management 342
Technology and the Convergence of Risk Management 345
Ten Predictions 348
2013 Looking Back 353
Chapter 20 Everlast Financial 357
Section Five ERM Implementation 361
Chapter 21 ERM Implementation 363
Benefits of Corporate Governance and ERM Practices 364
ERM Implementation Requirements 366
ERM Maturity Model 373
Other ERM Maturity Models 377
Risk Culture 378
Chapter 22 Role of the Board 381
Board Oversight Requirements 381
Current Board Practices 383
Case Study: JP Morgan Chase 386
The Last Line of Defense 388
Chapter 23 Risk Assessment 399
Risk Assessment Methodology 401
Best Practice Case Studies in Risk Assessment 414
Appendix: Risk Assessment Self-Evaluation Checklist 415
Chapter 24 Risk-Based Decision Making 423
ERM Decisions and Actions 423
Creating Value through ERM 427
Case Study: Duke Energy 437
Chapter 25 Dashboard Reporting 439
Traditional versus Dashboard Reporting 441
General Dashboard Applications 442
ERM Dashboard Implementation 444
Evolving Best Practices 450
Notes 451
Index 465
