Enterprise Risk Management

Unlock the incredible potential of enterprise risk management

There has been much evolution in terms of ERM best practices, experience, and standards and regulation over the past decade. Enterprise Risk Management: Today’s Leading Research and Best Practices for Tomorrow’s Executives, Second Edition is the revised and updated essential guide to the now immensely popular topic of enterprise risk management (ERM). With contributions from leading academics and practitioners, this book offers insights into what practitioners are doing and what the future holds. You’ll discover how you can implement best practices, improve ERM tools and techniques, and even learn to teach ERM. Retaining the holistic approach to ERM that made the first edition such a success, this new edition adds coverage of new topics including cybersecurity risk, ERM in government, foreign exchange risk, risk appetite, innovation risk, outsourcing risk, scenario planning, climate change risk, and much more. In addition, the new edition includes important updates and enhancements to topics covered in the first edition; so much of it has been revised and enhanced that it is essentially an entirely new book.

Enterprise Risk Management introduces you to the concepts and techniques that allow you to identify risks and prioritize the appropriate responses. This invaluable guide offers a broad overview, covering key issues while focusing on the principles that drive effective decision making and determine business success. This comprehensive resource also provides a thorough introduction to ERM as it relates to credit, market, and operational risk, as well as the evolving requirements of the board of directors’ role in overseeing ERM.

Through the comprehensive chapters and leading research and best practices covered, this book:

• Provides a holistic overview of key topics in ERM, including the role of the chief risk officer, development and use of key risk indicators and the risk-based allocation of resources
• Contains second-edition updates covering additional material related to teaching ERM, risk frameworks, risk culture, credit and market risk, risk workshops and risk profiles and much more. Over 90% of the content from the first edition has been revised or enhanced
• Reveals how you can prudently apply ERM best practices within the context of your underlying business activities

Filled with helpful examples, tables, and illustrations, Enterprise Risk Management, Second Edition offers a wealth of knowledge on the drivers, the techniques, the benefits, as well as the pitfalls to avoid, in successfully implementing ERM.

Foreword to the Second Edition by Robert S. Kaplan Foreword to the First Edition by Robert S. Kaplan

Part I: Overview and Drivers of Enterprise Risk Management

Chapter 1: Enterprise Risk Management: An Introduction and Overview

Chapter 2: A Brief History of Risk Management

Chapter 3: Strategic Risk Management: The Third Paradigm

Chapter 4: The Role of the Board of Directors and Senior Management in Enterprise Risk Management

Chapter 5: How to Teach Enterprise Risk Management: A Learner-Centered Activities Approach

Chapter 6: The Role of the Board in Risk Management Oversight

Part II: Enterprise Risk Management, Culture, and Control

Chapter 7: ERM Frameworks

Chapter 8: Becoming the Lamp Bearer: The Emerging Roles of the Chief Risk Officer

Chapter 9: Creating a Risk-Aware Culture

Chapter 10: Key Risk Indicators

Chapter 11: Decision Risk Management

Chapter 12: Increasing Adoption of Enterprise Risk Management in the U.S. Federal Government

Chapter 13: Toolmaking in Risk Management: The Case of Core Values and the Formalization of “Risk Appetite”

Chapter 14: Incorporating Risk Acumen and Enterprise Risk Management into Innovation Approaches

Chapter 15: Scenario Planning as an Enrichment of ERM

Chapter 16: Unconscious Bias and Risk Management

Chapter 17: Cognitive Bias: A Practical Approach

Part III: Enterprise Risk Tools and Techniques

Chapter 18: Risk Appetite and Tolerance in Competitive Strategy

Chapter 19: How to Plan and Run a Risk Management Workshop

Chapter 20: How to Prepare a Risk Profile

Chapter 21: How to Allocate Resources Based on Risk

Chapter 22: Quantitative Risk Assessment in ERM

Chapter 23: Risk Appetite

Chapter 24: Organizational Decision Making

Chapter 25: The Challenges of and Solutions for Implementing Enterprise Risk Management

Part IV: Types of Risk

Chapter 26: Market Risk Management and Common Elements with Credit Risk Management

Chapter 27: Credit Risk Management

Chapter 28: Operational Risk Management

Chapter 29: Managing Financial Risk and Its Interaction with Enterprise Risk Management

Chapter 30: Climate Change Risk

Chapter 31: Cybersecurity: Risks and Governance

Chapter 32: Foreign Exchange Risk Management

Chapter 33: Risk Management and Outsourcing

Chapter 34: Leveraging ERM for Growth

Chapter 35: Commercial and D&O Insurance for Large Corporations

Chapter 36: Managing Risk Associated with Project Delivery: A How-To Guide

Part V: Special Topics and Case Studies

Chapter 37: The Rise and Evolution of the Chief Risk Officer: Enterprise Risk Management at Hydro One

Chapter 38: Enterprise Risk Management in the Public Sector: A First Look at the U.S. Department of Commerce

Chapter 39: A Review of Academic Research on Enterprise Risk Management

Chapter 40: Lessons from the Academy: ERM Implementation in the University Setting

Chapter 41: Enterprise Risk Management: Lessons from the Field

Chapter 42: Financial Reporting and Disclosure Risk Management

Chapter 43: Directors and Risk: Whither the Best Practices: Evidence from Canada

John R.S. Fraser is the former Senior Vice President, Internal Audit, and Chief Risk Officer of Hydro One Networks Inc., one of North America’s largest electricity transmission and distribution companies.

Rob Quail is the Principal of Robert Quail Consulting. His professional focus is on the subject of enterprise risk management, and he has nearly 20 years of experience in developing and applying ERM tools and practices.

Betty Simkins, PhD, is Regents Professor of Finance, Williams Companies Chair, and Department Head in the Department of Finance at Oklahoma State University’s Spears School of Business. She serves on the Commodity Futures Trading Commission Market Risk Advisory Committee.

With the collapse of the subprime mortgage market in the United States in 2008, and the spread of the COVID-19 pandemic in 2020 and 2021, the need for effective enterprise risk management (ERM) has become ever clearer. At the same time, ERM best practices, experience, standards, and regulations have rapidly evolved over the past decade.

In the newly revised Second Edition of Enterprise Risk Management, distinguished executives, academics, consultants, and authors, John R.S. Fraser, Rob Quail, and Betty Simkins, deliver in-depth insights into what enterprise risk managers are actually doing in the real world. You’ll discover how you can teach, learn, and immediately implement best practices from a range of world-leading authorities on the subject. A wealth of helpful and practical tables and charts will assist you as you move through the chapters and learn about the drivers of enterprise risks, how to mitigate them, and common pitfalls to avoid.

The book takes a holistic and wide-ranging approach to enterprise risk management, and the new edition covers topics including cybersecurity, foreign exchange risk management, outsourcing, scenario planning as a risk management tool, and more. Enterprise Risk Management introduces you to the concepts and techniques that will help you identify risks and prepare appropriate mitigation responses. From credit, market, foreign exchange, and operational risk to the evolving risks from cybersecurity and climate change, this book discusses key ideas that will be central to the practice of any enterprise risk professional.

Perfect for finance professionals of all kinds, Enterprise Risk Management will also earn a place in the libraries of compliance and risk professionals who seek a comprehensive treatment of the management of risk in enterprises across a variety of industries.

Praise for ENTERPRISE RISK MANAGEMENT

“As with the first edition, Enterprise Risk Management: Today’s Leading Research and Best Practices for Tomorrow’s Executives, Second Edition continues to provide the essential 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 gurus.”
—Dr. Chris Bart, FCPA, Founder and Lead Faculty, The Directors College of Canada; Executive Chairman, Caribbean Governance Training Institute

“I believe that this unique and definitive collection will serve as a valuable reference for executives, risk managers, and students.”
—Laura Formusa, LLB, ICD.D, Corporate Director; former President and CEO, Hydro One Inc.“This book is by far the most comprehensive study I have seen, logically layered to enable a summary read or deep treatment of all risk categories, written by both experienced practitioners and top academics . . . Enthusiastically recommended!”
—Alan Garner, former President and CEO, Marsh Canada“In this Second Edition, the co-editors—Fraser, Quail, and Simkins—have put together a comprehensive and updated compilation of ERM research and best practices.”
—James Lam, President, James Lam & Associates; independent director and audit committee chairman, RiskLens, Inc.; author, Implementing Enterprise Risk Management-From Methods to Applications “Their insights merit careful consideration, and I expect every reader will learn a great deal and be able to apply a number of the suggestions in the book to upgrade their own risk programs.”
—Norman D. Marks, CPA, CRMA, author, speaker, thought leader; OCEG Fellow; Honorary Fellow of the Institute of Risk Management“The Second Edition of Enterprise Risk Management is the most comprehensive review of the history, applications, and implications of ERM in the marketplace. The cross-section of industries and scholars represented is impressive, and I highly recommend this book for anyone in the discipline—or in a leadership position.”
—Norean R. Sharpe, Ph.D., Dean and Joseph H. and Maria C. Schwartz Distinguished Chair, The Peter J. Tobin College of Business, St. John’s University