Corporate Value of Enterprise Risk Management

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.

The ultimate guide to maximizing shareholder value through ERMThe 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 ERMERM 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.

Foreword ixPreface xiAcknowledgments xixPart I: Basic ERM infrastructureChapter 1: Introduction 3Evolution of ERM 4Basel Accords 4September 11th 5Corporate Accounting Fraud 7Hurricane Katrina 9Rating Agency Scrutiny 10Financial Crisis 11Rare Events 13Long-Term Trends 14Challenges to ERM 15Summary 16Notes 16Chapter 2: Defining ERM 18Definition of Risk 18Definition of ERM 24Summary 58Notes 59Chapter 3: ERM Framework 61Value-Based ERM Framework 63Challenges of Traditional ERM Frameworks 63Value-Based ERM Framework 65Overcoming the Challenges by Using a Value-BasedERM Framework 83Summary 109Notes 110Part II: ERM Process CycleChapter 4: Risk Identification 113Components of Risk Identification 113Five Keys to Successful Risk Identification 114Risk Categorization and Definition 114Qualitative Risk Assessment 129Emerging Risk Identification 153Killer Risks 155Summary 166Notes 167Chapter 5: Risk Quantification 168Practical Modeling 169Components of Risk Quantification 174Calculate Baseline Company Value 174Quantify Individual Risk Exposures 185Quantify Enterprise Risk Exposure 207Summary 223Notes 224Chapter 6: Risk Decision Making 226Defining Risk Appetite and Risk Limits 227Integrating ERM into Decision Making 239Summary 269Notes 270Chapter 7: Risk Messaging 271Internal Risk Messaging 271External Risk Messaging 280Summary 292Notes 293Part III: Risk Governance And Other TopicsChapter 8: Risk Governance 297Focusing on Common Themes 298Components of Risk Governance 298Roles and Responsibilities 298Organizational Structure 319Policies and Procedures 325Summary 327Notes 327Chapter 9: Financial Crisis Case Study 329Summary of the Financial Crisis 330Evaluating Bank Risk Management Practices 332Summary 342Notes 343Chapter 10: ERM for Non-Corporate Entities 344Generalizing the Value-Based ERM Approach 344Complexities of Objectives-Based ERM 350Examples of NCEs 351Summary 369Conclusion 369Notes 369Glossary 371About the Author 389Index 391