Managing Financial Risk and Its Interaction with Enterprise Risk Management

This chapter first discusses financial risk management from a broad perspective, including possible definitions and examples of industry applications of financial hedging. The discussion then moves to a basic review of the theoretical rationales for managing (financial) risk and the related empirical findings. The potential for the interaction of financial hedging with other areas of risk management (such as operational and strategic) is then explored. Finally, there is a discussion regarding the lessons that can be applied to Enterprise Risk Management from the knowledge base about financial hedging.

This chapter first discusses financial risk management from a broadperspective, including possible definitions and examples ofindustry applications of financial hedging. The discussion thenmoves to a basic review of the theoretical rationales for managing(financial) risk and the related empirical findings.The potential for the interaction of financial hedging withother areas of risk management (such as operational and strategic)is then explored. Finally, there is a discussion regarding thelessons that can be applied to Enterprise Risk Management from theknowledge base about financial hedging.

Foreword by Robert S. Kaplan.Part I: Overview.Chapter One: Enterprise Risk Management: An Introduction andOverview.Chapter Two: A Brief History of Risk Management.Chapter Three: ERM and Its Role in Strategic Planning andStrategy Execution.Chapter Four: The Role of the Board of Directors and SeniorManagement in Enterprise Risk Management.Part II: ERM Management, Culture and Control.Chapter Five: Becoming the Lamp Bearer: The Emerging Roles ofthe Chief Risk Officer.Chapter Six: Creating A Risk Aware Culture.Chapter Seven: ERM Frameworks.Chapter Eight: Identifying and Communicating Key RiskIndicators.Part III: ERM Tools and Techniques.Chapter Nine: How to Create and Use Corporate RiskTolerance.Chapter Ten: How to Plan and Run a Risk Management Workshop.Chapter Eleven: How to Prepare a Risk Profile.Chapter Twelve: How to Allocate Resources Based on Risk.Chapter Thirteen: Quantitative Risk Assessment in ERM.Part IV: Types of Risk.Chapter Fourteen: Market Risk Management and Common Elementswith Credit Risk Management.Chapter Fifteen: Credit Risk Management.Chapter Sixteen: Operational Risk Management Chapter.Chapter Seventeen: Risk Management: Techniques in Search of aStrategy.Chapter Eighteen: Managing Financial Risk and its Interactionwith Enterprise Risk Management.Chapter Nineteen: Bank Capital Regulation and Enterprise RiskManagement.Chapter Twenty: Legal Risk Post SOX and the Subprime Fiasco:Back to the Drawing Board.Chapter Twenty One: Financial Reporting and Disclosure RiskManagement.Part V: Survey Evidence and Academic Research.Chapter Twenty Two: Who Reads What Most Often? A Survey ofEnterprise Risk Management Literature Read by Risk Executives.Chapter Twenty Three: Academic Research on Enterprise RiskManagement.Chapter Twenty Four: Enterprise Risk Management: Lessons fromthe Field.Part VI: Special Topics and Case Studies.Chapter Twenty Five: Rating Agencies Impact on Enterprise RiskManagement.Chapter Twenty Six: Enterprise Risk Management: CurrentInitiatives and Issues.Chapter Twenty Seven: Establishing ERM Systems in EmergingCountries.Chapter Twenty Eight: The Rise and Evolution of the Chief RiskOfficer: Enterprise Risk Management at Hydro One.Conclusion.Endnotes.About the Authors.Index.