Enterprise Risk Management A Methodology for Achieving Strategic Objectives

by Monahan, Gregory

• ISBN13: 9780470372333
• ISBN10: 0470372338
• Edition: 1st
• Format: Hardcover
• Copyright: 2008-09-29
• Publisher: Wiley

Summary

Written for enterprise risk management (ERM) practitioners who recognize ERM?s value to their organization, Enterprise Risk Management: A Methodology for Achieving Strategic Objectives thoroughly examines operational risk management and allows you to leverage ERM methodology in your organization by putting author and ERM authority Gregory Monahan's Strategic Objectives At Risk (SOAR) methodology to work. A must-read for anyone interested in risk management as a strategic, value-adding tool, this no-nonsense book shows you how to use ERM and SOAR to empower your company to go from stuck to competitive.

Author Biography

Gregory Monahan is a consultant and the former head of risk practice for SAS Australia. His consulting clients include SAS Australia/New Zealand, and the University of New South Wales. While at SAS Australia, he helped define and execute the marketing strategy for risk management products, primarily credit and operational risk. In addition, he helped develop the first version of the SAS Credit Risk Management Solution.

Table of Contents

Preface	p. xi
Acknowledgments	p. xv
Introduction	p. xvii
Defining Enterprise Risk Management	p. 1
Risks	p. 4
Risk Drivers	p. 5
Controls	p. 7
Inherent and Residual Risk	p. 8
Events	p. 9
Outcomes	p. 9
Management	p. 10
Enterprise Risk Management	p. 11
Strategic Objectives	p. 13
Financial Objectives	p. 14
Statement of Financial Position	p. 14
Statement of Financial Performance	p. 15
Market Objectives	p. 15
Customers	p. 16
Suppliers	p. 16
Competitors	p. 17
Partners	p. 17
Regulators	p. 17
Operational Objectives	p. 18
Corporate Governance	p. 18
Human Resources	p. 18
Management Team	p. 19
Processes	p. 19
Systems	p. 20
Note on the Interdependence of Objectives	p. 20
At-Risk Concept	p. 22
A Very Simple Distribution	p. 23
A Slightly More Interesting Distribution	p. 24
Location of the Distribution	p. 30
Basic Statistical Measures	p. 32
At-Risk Measure	p. 33
SOAR (the Methodology): Strategic Objectives at Risk	p. 38
SOAR Methodology Components	p. 38
Strategic Objectives	p. 39
Execution Resources (The Enterprise Risk Management Office)	p. 44
SOAR Process	p. 45
SOAR (the Process)	p. 46
Set Metrics for Defined Strategic Objectives	p. 48
Why Measure?	p. 49
Classes of Metrics	p. 50
Metrics for Strategic Objectives	p. 51
Metrics for Risk Drivers	p. 52
Metrics for Controls	p. 53
Setting Metrics	p. 54
Cause and Effect	p. 55
Cause-and-Effect Diagrams	p. 59
Causal Loop Diagrams	p. 59
Process Flow Charts	p. 60
Regression Analysis	p. 62
Sensitivity Analysis	p. 62
Scenario Analysis	p. 63
Examples of Metrics	p. 65
Setting Target Values for Metrics	p. 66
Observe Metric Values	p. 72
Observation Methods	p. 72
Gathering Available Data	p. 72
Calculating Data	p. 75
Self-Assessment	p. 75
Recording Observations of Metrics	p. 76
Frequency of Observation	p. 77
Triggers	p. 78
Analyze Movements in Metrics	p. 80
Conducting the Analysis	p. 80
Validating the Data	p. 84
Validating Metric Choice	p. 89
Reporting Findings	p. 90
React to the Metric Analysis	p. 94
Record the Rationale for Your Reaction	p. 97
Simple Task of Reacting According to the Measures	p. 97
Confidence	p. 106
Difficult Task of Managing Human Behaviors	p. 107
SOAR Dashboard	p. 112
Today's Dashboard	p. 112
SOAR Black Box Recorder	p. 116
Existing Enterprise Risk Management Approaches	p. 117
Six Sigma	p. 117
Balanced Scorecard	p. 118
COSO	p. 118
Regulation and Compliance	p. 121
Sarbanes-Oxley Act	p. 121
Basel II	p. 122
AS/NZS 4360:2004:Risk Management	p. 122
Organizational Risk Management Policy	p. 122
Application of the Concept of "Shifting the Distribution"	p. 124
GE	p. 124
Bank Treasury Operations	p. 125
Humans in Daily Life	p. 125
Airlines	p. 126
One Other Example	p. 127
Implementing the SOAR Methodology	p. 129
Resourcing the Enterprise Risk Management Office	p. 129
Enterprise Risk Management Officers	p. 130
Enabling Technology	p. 130
Applying the SOAR Process	p. 132
SOAR in Action Example	p. 135
Set (Metrics)	p. 135
Cause and Effect (and Why, Why, Why?)	p. 142
Cause-and-Effect Diagrams	p. 145
Causal Loop Diagrams	p. 145
Process Flowcharts	p. 145
Regression Analysis	p. 146
Sensitivity Analysis	p. 146
Scenario Analysis	p. 147
Observe (End-of-Year Metric Values)	p. 148
Analyze (Movements in Metric Values)	p. 149
React (to the End-of-Year Analysis)	p. 157
Set	p. 158
Observe	p. 158
Analyze	p. 159
React	p. 161
Conclusion	p. 163
SOAR Methodology FAQ	p. 165
Resources	p. 171
Index	p. 173
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