Practical Enterprise Risk Management

How to Optimize Business Strategies Through Managed Risk Taking

Liz Taylor

• Publisher: Kogan Page
• Year: 2014
• Print ISBN:
  9780749470531
• Edition: 1
• eBook ISBN:
  9780749470548
• Topic: Business
• Subtopic: Insurance
• Index: Business

Practical Enterprise Risk Management addresses the real need for organizations to take more managed risks in order to maximize business strategies and achieve long term goals. Based on ISO 31000 and applying current best practice, it provides templates and examples that can be adapted for any industry. Breaking down the theory on enterprise risk management, it helps you see risk as both an opportunity and a threat whilst giving you guidance on how to implement it. It provides models for Risk Adjusted Return on Capital to evaluate R.O.I and measure performance, advice on emergent risks, as well as best practice and advice on risk communication, transparency and protecting the brand.

Including a comprehensive overview of risk management responsibilities for boards, Practical Enterprise Risk Management lifts the lid on the whole process, helping you to embed ERM into your organization, reach your goals and take more, and more effective, managed risks.

Appendix 1

Examples of corporate governance and ERM regulations

The January 2013 Guidance from the Office of the Superintendent of Financial Institutions Canada (OSFI)1 sets out what it calls its five lines of defence for Federally Regulated Financial Institutions (organizations) including:

   1      Corporate Governance for organizations

           –  Defining Corporate Governance;

           –  The Board, Senior Management and the Oversight Functions.

   2      The Role of the Board of Directors

           –  Board Responsibilities

           –  Board Effectiveness

           –  Board Skills and Competencies

           –  Board Independence

           –  Board Chair

           –  Interface between the Board and Senior Management

           –  Interface between the Board and the Oversight Functions

           –  Board Oversight of Internal Controls.

   3      Risk Governance

           –  Risk Appetite Framework

           –  Oversight of Risk

           –  Board Risk Committee

           –  Chief Risk Officer.

   4      The Role of the Audit Committee

   5      Supervision of organizations

           –  The Role of Corporate Governance in OSFI’s Supervisory Process

           –  OSFI’s Supervisory Assessment

           –  Changes to the Board and Senior Management.

There is an interesting parallel with the UK Code of Governance where issues of board collective responsibility, of leadership, effectiveness and accountability including ERM are developed. UK listed companies (including, but not limited to, financial institutions which are subjected to much more rigorous risk management requirements) are expected to comply with the Code or explain why they do not or cannot comply. The main aspects are summarized in Appendix 2.

Note

1      http://www.osfi-bsif.gc.ca/app/DocRepository/1/eng/guidelines/sound/guidelines/CG_Guideline_e.pdf

Appendix 2

The main principles of the UK Code of Governance, October 2012

Section A: Leadership

• Board collectively responsible for the long-term success of the company.

• Clear division of responsibilities at the head of the company.

• Chairman responsible for leadership of the board and ensuring its effectiveness.

• Members of a unitary board and non-executive directors to challenge and help develop proposals on strategy.

Section B: Effectiveness

• Appropriate balance of skills, experience, independence and knowledge of the company.

• Appointment of new directors to be formal, rigorous and transparent.

• Directors to allocate sufficient time.

• Induction and ongoing training for directors.

• Information supplied to board to be timely and sufficient.

• A formal and rigorous annual evaluation by board of its own performance and that of its committees and individual directors.

• Re-election at regular intervals for all directors, subject to continued satisfactory performance.

Section C: Accountability

• A fair, balanced and understandable assessment of the company’s position and prospects presented by board.

• The board is responsible for determining the nature and extent of the significant risks it is willing to take in achieving its strategic objectives.

• The board should maintain sound risk manage...

Table of contents

• Practical Enterprise Risk Management
• Practical Enterprise Risk Management
• Contents
• List of Figures
• List of Tables
• Foreword Steve Fowler
• Foreword Mrutyunjay Mahapatra
• Acknowledgements
• 01 Introduction
• 02 About enterprise risk management
• 03 Risk as an opportunity/threat to objectives and value drivers
• 04 Implementing an ERM programme
• 05 Risk attitude, risk propensity and risk appetite
• 06 ERM culture, blame, boundaries and elephants in the room
• 07 Embedding and integrating ERM
• 08 Maturity in enterprise risk management
• 09 Resilience and sustainable habits
• 10 Learning and communication
• 11 Outline
• 12 Deliverables from quantitative ERM approaches
• 13 Simple, elegant ERM tools for senior management
• 14 ERM and performance management synergies
• 15 The key strategic questions for senior management and boards to ask themselves
• Appendix 1
• Appendix 2
• Appendix 3
• Appendix 4
• Appendix 5
• Appendix 6
• Appendix 7
• Further Reading
• Index
• Copyright Page