Implementing Enterprise Risk Management E-Book

John R. S. Fraser

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Veröffentlichungsjahr: 2014

Beschreibung

Overcome ERM implementation challenges by taking cues from leading global organizations

Implementing Enterprise Risk Management is a practical guide to establishing an effective ERM system by applying best practices at a granular level. Case studies of leading organizations including Mars, Statoil, LEGO, British Columbia Lottery Corporation, and Astro illustrate the real-world implementation of ERM on a macro level, while also addressing how ERM informs the response to specific incidents. Readers will learn how top companies are effectively constructing ERM systems to positively drive financial growth and manage operational and outside risk factors. By addressing the challenges of adopting ERM in large organizations with different functioning silos and well-established processes, this guide provides expert insight into fitting the new framework into cultures resistant to change.

Enterprise risk management covers accidental losses as well as financial, strategic, operational, and other risks. Recent economic and financial market volatility has fueled a heightened interest in ERM, and regulators and investors have begun to scrutinize companies' risk-management policies and procedures. Implementing Enterprise Risk Management provides clear, demonstrative instruction on establishing a strong, effective system. Readers will learn to:

• Put the right people in the right places to build a strong ERM framework
• Establish an ERM system in the face of cultural, logistical, and historical challenges
• Create a common language and reporting system for communicating key risk indicators
• Create a risk-aware culture without discouraging beneficial risk-taking behaviors

ERM is a complex endeavor, requiring expert planning, organization, and leadership, with the goal of steering a company's activities in a direction that minimizes the effects of risk on financial value and performance. Corporate boards are increasingly required to review and report on the adequacy of ERM in the organizations they administer, and Implementing Enterprise Risk Management offers operative guidance for creating a program that will pass muster.

Leseprobe

Additional Praise for

Implementing Enterprise Risk Management

“Educators the world over seeking to make the management of risk an integral part of management degrees have had great difficulties in providing their students with a definitive ERM text for their course. The Standards and associated Handbooks helped, but until the arrival of Implementing Enterprise Risk Management: Case Studies and Best Practices, there has been no text to enlighten students on the application of an effective program to manage risk across an enterprise so that objectives are maximized and threats minimized. Fraser, Simkins, and Narvaez have combined with a group of contributors that represent the cream of risk practitioners, to provide the reader with a clear and concise journey through the management of risk within a wide range of organizations and industries. The knowledge, skills, and experience in the management of risk contained within the covers of this book are second to none. It will provide a much needed resource to students and practitioners for many years to come and should become a well-used reference on the desk of every manager of risk.”

—Kevin W. Knight AM, chairman, ISO/TC 262—Risk Management

“The authors—Fraser, Simkins, and Narvaez—have done an invaluable service to advance the science of enterprise risk management by collecting an extensive number of wonderful case studies that describe innovative risk management practices in a diverse set of companies around the world. This book should be an extremely valuable source of knowledge for anyone interested in the emerging and evolving field of risk management.”

—Robert S. Kaplan, senior fellow, Marvin Bower Professor of Leadership Development, emeritus, Harvard University

“Lessons learned from case studies and best practices represent an efficient way to gain practical insights on the implementation of ERM. Implementing Enterprise Risk Management provides such insights from a robust collection of ERM programs across public companies and private organizations. I commend the editors and contributors for making a significant contribution to ERM by sharing their experiences.”

—James Lam, president, James Lam & Associates; director and Risk Oversight Committee chairman, E*TRADE Financial Corporation; author, Enterprise Risk Management—From Incentives to Controls

“For those who still think that enterprise risk management is just a fad, the varied examples of practical value-generating uses contained in this book should dispel any doubt that the discipline is here to stay! The broad collection of practices is insightful for students, academics, and executives, as well as seasoned risk management professionals.”

—Carol Fox, ARM, director of Strategic and Enterprise Risk Practice, RIMS

“Managing risk across the enterprise is the new frontier of business management. Doing so effectively, in my view, will be the single most important differentiating factor for many enterprises in the twenty-first century. Implementing Enterprise Risk Management: Case Studies and Best Practices is an innovative and important addition to the literature and contains a wealth of insight in this critical area. This book's integration of theory with hands-on, real-world lessons in managing enterprise risk provides an opportunity for its readers to gain insight and understanding that could otherwise be acquired only through many years of hard-earned experience. I highly recommend this book for use by executives, line managers, risk managers, and business students alike.”

—Douglas F. Prawitt, professor of Accounting at Brigham Young University, and Committee of Sponsoring Organizations (COSO) Executive Board member

“The real beauty of and value in this book is its case study focus and the wide variety of firms profiled and writers' perspectives shared. This will provide readers with a wealth of details and views that will help them chart an ERM journey of their own that is more likely to fit the specific and typically customized ERM needs of the firms for whom they toil.”

—Chris Mandel, senior vice president, Strategic Solutions for Sedgwick; former president of the Risk Management Society and the 2004 Risk Manager of the Year

“Implementing Enterprise Risk Management looks at many industries through excellent case studies, providing a real-world base for its recommendations and an important reminder that ERM is valuable in many industries. I highly recommend this text.”

—Russell Walker, Clinical associate professor, Kellogg School of Management; author of Winning with Risk Management

“The body of knowledge in Implementing Enterprise Risk Management continues to develop as business educators and leaders confront a complex and rapidly changing environment. This book provides a valuable resource for academics and practitioners in this dynamic area.”

—Mark L. Frigo, director, Strategic Risk Management Lab, Kellstadt Graduate School of Business, DePaul University

“The management of enterprise risk is one of the most vexatious problems confronting boards and executives worldwide. This is why this latest book by Fraser, Simkins, and Narvaez is a much needed and highly refreshing approach to the subject. The editors have managed to assemble an impressive list of contributors who, through a series of fascinating real-life case studies, adroitly help educate readers to better understand and deal with the myriad of risks that can assault, seriously maim, and/or kill an organization. This is a ‘how to’ book written with the ‘risk management problem solver’ in mind. It provides the link that has been missing for effectively teaching ERM at the university and executive education levels and it is an exceptional achievement by true risk management advocates.”

—Dr. Chris Bart, FCPA, founder and lead faculty, The Directors College of Canada

“The Institute of Risk Management welcomes the publication of this highly practical text which should be of great interest to our students and members around the world. Implementing Enterprise Risk Management brings together a fine collection of detailed case studies from organizations of varying sizes and working in different sectors, all seeking to enhance their business performance by managing their risks more effectively, from the boardroom to the shop floor. This book makes a valuable contribution to the body of knowledge of what works that will benefit the development of the risk profession.”

—Carolyn Williams, technical director, Institute of Risk Management

The Robert W. Kolb Series in Finance provides a comprehensive view of the field of finance in all of its variety and complexity. The series is projected to include approximately 65 volumes covering all major topics and specializations in finance, ranging from investments, to corporate finance, to financial institutions. Each volume in the Kolb Series in Finance consists of new articles especially written for the volume.

Each volume is edited by a specialist in a particular area of finance, who develops the volume outline and commissions articles by the world's experts in that particular field of finance. Each volume includes an editor's introduction and approximately thirty articles to fully describe the current state of financial research and practice in a particular area of finance.

The essays in each volume are intended for practicing finance professionals, graduate students, and advanced undergraduate students. The goal of each volume is to encapsulate the current state of knowledge in a particular area of finance so that the reader can quickly achieve a mastery of that special area of finance.

IMPLEMENTING ENTERPRISE RISK MANAGEMENT

Case Studies and Best Practices

Editors

John R.S. Fraser

Betty J. Simkins

Kristina Narvaez

The Robert W. Kolb Series in Finance

Cover Design: Wiley Cover Image: © iStock.com/clauiad

Copyright © 2015 by John R.S. Fraser, Betty J. Simkins, Kristina Narvaev. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

ISBN 978-1-118-69196-0 (Hardcover) ISBN 978-1-118-74576-2 (ePDF) ISBN 978-1-118-74618-9 (ePub)

To Wendy, my wonderful wife and my inspiration, and to my parents who instilled in me a lifelong thirst for learning.

—John Fraser

To my husband (Russell) and our family: sons and daughters-in-law (Luke & Stephanie and Walt & Lauren), daughter and son-in-law (Susan & Jason), and our youngest daughter (April). Thank you for your love, support, and encouragement!

—Betty Simkins

I would like to thank my husband and four children for supporting me on my journey of writing two chapters and co-editing this book. I would also like to thank the Risk and Insurance Management Society for supporting me during my educational years and providing great workshops and conferences on enterprise risk management.

—Kristina Narvaez

CONTENTS

Foreword

Chapter 1: Enterprise Risk Management Case Studies: An Introduction and Overview

The Evolution of Enterprise Risk Management

Why the Need for a Book with ERM Case Studies?

Summary of the Book Chapters

Part I: Overview and Insights for Teaching ERM

Part II: ERM Implementation at Leading Organizations

Part III: Linking ERM to Strategy and Strategic Risk Management

Part IV: Specialized Aspects of Risk Management

Part V: Mini-Cases on ERM and Risk

Part VI: Other Case Studies

Conclusion

Notes

References

About the Editors

Part I: Overview and Insights for Teaching ERM

Chapter 2: An Innovative Method to Teaching Enterprise Risk Management: A Learner-Centered Teaching Approach

Learner-Centered Teaching: The

WHY

Five Key Changes to Practice the

WHAT

Conclusion

Questions

Appendix: LCT ERM Examples from the

HOW

References

About the Contributors

Part II: ERM Implementation at Leading Organizations

Chapter 3: ERM at Mars, Incorporated: ERM for Strategy and Operations

Mars' ERM History

Phase 2—Success

Global Rollout

Reporting

2007 Operating Plan Workshops

Technology

Aggregation

Template Evolution

Special Situations

Major Acquisition

Conclusion

Questions

Note

About the Contributor

Chapter 4: Value and Risk: Enterprise Risk Management at Statoil

ERM at Statoil: A Brief History

ERM Foundations

ERM Processes in Statoil Today

Optimizing Total Risk

Total Risk Optimization: Lessons Learned

Risk Aggregation

The Frontiers

Conclusion

Questions

Notes

References

About the Contributors

Chapter 5: ERM in Practice at the University of California Health System

The Enterprise Risk Management Program

Premium Rebate Program

Erm and the Center for Health Quality and Innovation

Protected Health Information Value Estimator (PHIve)

Questions

Notes

About the Contributor

Chapter 6: Strategic Risk Management at the LEGO Group: Integrating Strategy and Risk Management

About the LEGO Group

The LEGO Group Strategy

LEGO Strategic Risk Management

Enterprise Risk Management (Step 1)

Monte Carlo Simulation (Step 2)

AROP: Active Risk Assessment of Business Projects (Step 3)

Preparing for Uncertainty: Defining and Testing Strategies (Step 4)

The PAPA Model

Stategic Risk Management Return on Investment

Conclusion

Questions

Notes

References

About the Contributors

Chapter 7: Turning the Organizational Pyramid Upside Down: Ten Years of Evolution in Enterprise Risk Management at United Grain Growers

Background—Operating Environment

Governance

ERM Credit Financing Outcomes

Agricore United

Harvesting Value

Conclusion

Questions

Acknowledgments

Notes

About the Contributor

Chapter 8: Housing Association Case Study of ERM in a Changing Marketplace

Background

Sector Issues

Charitable Status

Some Useful Methodology

Four Associations

Association A: London & Quadrant

Association B: RCT Homes

Association C: Ability Housing Association

Association D: GreenSquare

Questions

Notes

References

About the Contributor

Chapter 9: Lessons from the Academy: ERM Implementation in the University Setting

The Higher Education Environment

Emergence of ERM in Higher Education

Adopting and Implementing ERM in Colleges and Universities

The University of Washington: A Journey of Discovery

Evolution of ERM at UW

ERM Structure at UW

UW's ERM Model

Outcomes and Lessons Learned

What Next?: Current Priorities and Future Direction

Conclusion

Questions

Notes

References

About the Contributor

Chapter 10: Developing Accountability in Risk Management: The British Columbia Lottery Corporation Case Study

Background

The Beginnings of the Risk Management Journey

Learning from the First ERM Initiative

Restarting the Program―2006–2008

Key Steps in the Development of the ERM Program

Revitalizing the ERM Program—2009–2010

Strengthening the Program—2010–2013

Building the Risk Profile

The Role of Risk Managers, Champions, and Committees

Developing a More Sophisticated Approach to Risk Analysis and Evaluation

Conclusion

Questions

Notes

References

About the Contributor

Chapter 11: Starting from Scratch: The Evolution of ERM at the Workers' Compensation Fund

Toward ERM Program Initiation

Initial Actions

Maturing: Years 1 and 2

The Future

Questions

Notes

About the Contributor

Chapter 12: Measuring Performance at Intuit: A Value-Added Component in ERM Programs

Intuit's ERM Journey

ERM Maturity Model

Benefits of Measuring Performance in ERM Programs

ERM Performance Measurement and Reporting at Intuit

Conclusion

Questions

About the Contributor

Chapter 13: TD Bank's Approach to an Enterprise Risk Management Program

Background

Conclusion

Questions

References

About the Contributors

Part III: Linking ERM to Strategy and Strategic Risk Management

Chapter 14: A Strategic Approach to Enterprise Risk Management at Zurich Insurance Group

Enterprise Risk Management at Zurich

Zurich Group's Enterprise Risk Management Framework

Role of the Chief Risk Officer and Group Risk Management at Zurich

Working with External Stakeholders

Zurich's Proprietary Tools Used in ERM Framework

Categorizing Various Risks at Zurich

Capital Management

Zurich's Business Resilience Tools

How Zurich Uses Its ERM Tools to Create New Value

Conclusion

Appendix

About the Contributors

Questions

References

Chapter 15: Embedding ERM into Strategic Planning at the City of Edmonton

Context—City of Edmonton

ERM Development in the Past

Current Overall ERM Development

Links to Strategic Plan and to Other Strategic Tools

Selecting and Testing a Strategic Risk Management Model

Selecting an ERM Framework

Recommended Strategic ERM Model

Lessons Learned

Conclusion

Appendix: Summary of

THE WAY AHEAD

, Edmonton's Strategic Plan

Questions

Notes

About the Contributor

Chapter 16: Leveraging ERM to Practice Strategic Risk Management

ERM: A Reexamination of Purpose

Regulatory Environment

Leveraging ERM to Practice Strategic Risk Management

Managing and Measuring Value Creation

Risk Management Fault Line

Value Maps

Additional Tools and Techniques

Conclusion

Questions

Notes

About the Contributors

Part IV: Specialized Aspects of Risk Management

Chapter 17: Developing a Strategic Risk Plan for the Hope City Police Service

The Context

Some Background on the Hope City Police Service

What the Consultant Heard

Community Views on Police Issues

Questions

Notes

About the Contributor

Chapter 18: Blue Wood Chocolates

Background

The Company

Market Overview

Blue Wood Financial Performance

Conclusion

Appendix I: Blue Wood Chocolates

Appendix II: The Hershey Company

Appendix III: Rocky Mountain Chocolate Factory, Inc.

Questions

Notes

About the Contributors

Chapter 19: Kilgore Custom Milling

Background

Kilgore Custom Milling

The Management Team

The Company

The New Contract

The Financial Risk Management Meeting

Questions

About the Contributors

Chapter 20: Implementing Risk Management within Middle Eastern Oil and Gas Companies