Enterprise. Management. Front Incentives to Controls

Transcription

1 Enterprise Management Front Incentives to Controls Second Edition JAMES LAM WILEY

2 Contents Preface Acknowladgments xhi xvli SGCTONONE Hsk Mangement In Context 1 CHARTER 1 hitpoductlon 8 The Benefits of Risk Management 6 Integration Adds Value 9 Cautionary Tales 12 CHAPTER2 LessonsLaarnad 21 Lesson #1: Know Your Business 23 Lessen #2: Establish Checks and Balances 24 Lesson #3: Set Limits and Boundaries 25 Lesson #4: Keep Your Eye on the Cash 26 Lesson #5: Use the Right Yardstick 27 Lesson #6: Pay for the Performance You Want 27 Lesson #7: Balance the Yin and the Yang 28 CHAPTER 8 Concspts and Processss 81 Risk Concepts 32 Risk Processes 36 Risk Awareness 38 Risk Measurement 40 VII

3 vfll CONTENTS Risk Control 42 Risk Is a Bell Curve 48 CHAPTER4 WtatlsffiM? 61 ERM Definitions 53 The Benefits of ERM 53 The Chief Risk Officer 57 Components of ERM 61 8ECT0N TWO THe Enterprise Risk Management Framework 87 CHAPTER 6 Corporate Governance 69 Codes of Conduct 71 Best Practices 72 Linking Corporate Governance and ERM 77 CHAPTER 6 Uns Management 88 The Relationship Between Line and Risk Functions 84 Key Challenges 89 Best Practices 92 CHAPTER 7 Portfolio Management 98 The Theory of Active Portfolio Management 100 Benefits of Active Portfolio Management 102 Practica! Applications of Portfolio Management 105 CHAPTER 8 Risk Transfer III A Brief History of ART 112 Advantages of ART 116 Pitfalls of ART 119 A Look to the Future 122 Case Study: Honeywell 124 Case Study: Barclays 124

4 Contents Ix CHARTER 8 Risk Analytlcs 127 Risk Control Analytics 128 Risk Optimization Analytics 133 Market Risk Analytics 135 Credit Risk Analytics 138 Credit Portfolio Models 141 Operational Risk Analytics 142 GRC Systems 143 CHAPTER 10 Data and Technology 147 Early Systems 147 Data Management 149 Interface Building 151 Middleware 152 Distributed Architectures 153 Key Factors for a Successful Implementation 154 CHAPTER 11 Stakeholder Management 157 Employees 158 Customers 161 Regulators 164 Rating Agencies 166 Shareholder Service Providers 167 Business Partners 169 8ECTI0N THREE Risk Management Applications 178 CHAPTER 12 Credit Risk Management 175 Key Credit Risk Concepts 176 The Credit Risk Management Process 184 Basel Requirements 192 Best Practices in Credit Risk Management 196 Case Study: Export Development Corporation (EDC) 200

5 X CHAPTER 18 Market RIA Management Types of Market Risk Market Risk Measurement Market Risk Management Best Practices in Market Risk Management Case Study: Market Risk Management at Chase CHAPTER 14 Operation^ Risk Management Operational Risk Definition and Scope The Operational Risk Management Process Best Practice in Operational Risk Management Emerging IT Risks Case Study: Heller Financial CHAPTER 16 Business Applications Stage I: Minimizing the Downside Stage II: Managing Uncertainty Stage III: Performance Optimization The Further Evolution of Risk Management CHAPTHI16 Fhianclal tostitutions Industry Trends Risk Management Requirements Systemic Risk A Look to the Future Case Study: CIBC ' CHAPTER 17 BiergyfTrms Industry Trends Risk Management Requirements A Look to the Future Lessons Learned from Enron Lessons Learned from the BP Oil Spill CHAPTER 18 Non-Hnancla! Corporatlons Risk Management Requirements Best Practices in Corporate Risk Management

6 Contents *1 Case Study: Microsoft 333 Case Study: Ford 335 Case Study: Airbus and Boeing 336 SEKTION FQUR ^ /: -- A Look to the Futurs 839 CHAPTER 19 PredcHons 841 The Profession of Risk Management 342 Technology and the Convergence of Risk Management 345 Ten Predictions Looking Back 353 CHAPTHt 20 Everfast Hnanclal 867 8ECT10N HVE. ERM Implementation CHAPTER 21 BtM Implementation Benefits of Corporate Governance and ERM Practices ERM Implementation Requirements ERM Maturity Model Other ERM Maturity Models Risk Culture CHAPTER 22 Hole of the Board Board Oversight Requirements Current Board Practices Case Study: JP Morgan Chase The Last Line of Defense CHAPTER 28 Risk Assessment Risk Assessment Methodology Best Practice Case Studies in Risk Assessment Appendix: Risk Assessment Self-Evaluation Checklist

7 XII CONTENTS CHAPTER 24 Risk-Based Doctelon Maklng 428 ERM Decisions and Actions 423 Creating Value through ERM 427 Case Study: Duke Energy 437 CHAPTER 25 Dashboard Roporttog 488 Traditional versus Dashboard Reporting 441 General Dashboard Applications 442 ERM Dashboard Implementation 444 Evolving Best Practices 450 Notes 451 Index 485