Corporate Value of Enterprise Risk Management: The Next Step in Business Management
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The ultimate guide to maximizing shareholder value through ERM
The first book to introduce an emerging approach synthesizing ERM and value-based management, Corporate Value of Enterprise Risk Management clarifies ERM as a strategic business management approach that enhances strategic planning and other decision-making processes.
- A hot topic in the wake of a series of corporate scandals as well as the financial crisis
- Looks at ERM as a way to deliver on the promise of balancing risk and return
- A practical guide for corporate Chief Risk Officers (CROs) and other business professionals seeking to successfully implement ERM
ERM is here to stay. Sharing his unique insights and experiences as a recognized global thought leader in this field, author Sim Segal offers world-class guidance on how your business can successfully implement ERM to protect and increase shareholder value.
approaches, which have no direct connection to value. In sharp contrast, this book presents an ERM approach that is centrally focused on measuring, protecting, and increasing company value. INTENDED AUDIENCE The primary audience for this book is corporate stakeholders, including: & & & & & & & & & Heads of ERM programs, such as chief risk officers (CROs) and their staff Heads of internal audit Heads of compliance Senior executives, such as CEOs and CFOs Management, such as business segment
if such a risk event occurs and the company is not adequately protected. However, a more common and immediate consequence of the traditional risk management bottom-up approach is the converse—many risks are over-mitigated. This results in waste, as resources are unwittingly spent on excess mitigation which management would have vetoed, if the proper information had been available. In contrast, ERM introduces a logical approach based on the overall volatility of the enterprise and the desired
reduce risk exposures or to increase risk exposures. The second category includes embedding ERM into routine decision making, such as strategic planning, strategic and tactical decisions, and transactions. Risk decision making is discussed in detail in Chapter 6. 4. Risk messaging. The fourth step in the ERM process cycle is risk messaging. This consists of two distinct categories of messaging: internal risk messaging and external risk messaging. Internal risk messaging involves integrating ERM
process cycle. It enhances the key risk ranking and prioritization performed in the prior ERM process step—risk identification—and it also provides the information necessary to perform the next ERM process step—risk decision making. The key linkage performed in this step is the connection of risk and value by quantifying risk in terms of its value impact. This is the bridge between risk and return. In this chapter, we will address risk quantification as performed using the value-based ERM
Page 7 Contents & vii PART III: RISK GOVERNANCE AND OTHER TOPICS Chapter 8: Risk Governance Focusing on Common Themes Components of Risk Governance Roles and Responsibilities Organizational Structure Policies and Procedures Summary Notes Chapter 9: Financial Crisis Case Study 297 298 298 298 319 325 327 327 329 Summary of the Financial Crisis Evaluating Bank Risk Management Practices Summary Notes 330 332 342 343 Chapter 10: ERM for Non-Corporate Entities 344 Generalizing the