Strategic risk management practice : how to deal effectively with major corporate exposures

Library	Item Barcode	Call Number	Material Type	Item Category 1	Status
Searching... PSZ KL	30000010278115	HD61 A53 2010	Open Access Book	Book	Searching... Unknown
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At a time when corporate scandals and major financial failures dominate newspaper headlines, the importance of good risk management practices has never been more obvious. The absence or mismanagement of such practices can have devastating effects on exposed organizations and the wider economy (Barings Bank, Enron, Lehmann Brothers, Northern Rock, to name but a few). Today's organizations and corporate leaders must learn the lessons of such failures by developing practices to deal effectively with risk. This book is an important step towards this end. Written from a European perspective, it brings together ideas, concepts and practices developed in various risk markets and academic fields to provide a much-needed overview of different approaches to risk management. It critiques prevailing enterprise risk management frameworks (ERMs) and proposes a suitable alternative. Combining academic rigour and practical experience, this is an important resource for graduate students and professionals concerned with strategic risk management.

Author Notes

Torben Juul Andersen is Professor at the Copenhagen Business School. He has taught financial economics and strategy at George Mason University and Johns Hopkins University. He previously held positions as Senior Consultant at PHB Hagler Bailly, Arlington; Senior Vice President at Unibank A/S; Managing Director at SDS Securities A/S, Copenhagen; and Vice President at Citibank/Citicorp Investment Bank, London. He is the author of numerous articles and books on strategy and risk management, including Global Derivatives (2005) and Currency and Interest Rate Hedging (1993).
Peter Winther Schrder is a director at Saxo Bank A/S, Copenhagen where he is responsible for all risk management within the group. He has held various executive risk management positions in the banking, insurance and management services industries over the past twenty years where he gained comprehensive practical experience in all aspects of financial and operational risk management. He is also a part-time associate professor at the Copenhagen Business School.

Reviews 1

Choice Review

Andersen (Copenhagen Business School) and Schroder (Saxo Bank A/S, Copenhagen) take a nuanced, comprehensive approach to all aspects of risk and risk management for the modern corporation. For them, all management is risk management, which nicely encapsulates the state of thinking in both scholarly and practitioner communities at this time. The authors offer clear explications, with compelling examples, of the major sources of corporate risk and the key tools for risk analysis and management, including insurance, hedges, options, and derivatives. They also provide excellent explanations of enterprise risk management and strategic risk analysis, which are messier but invaluable tools for comprehensive risk appreciation and management. Less tangible but equally valuable are the authors' nuanced discussions of the dynamics of modern corporate risks and the limits of discrete tools, which compel a deep appreciation of the topics. The last portion of the book offers an advance on what is typically provided by enterprise risk management programs: suggestions for how to structure and manage organizations to enhance awareness and promote astute responses to risk. The introduction of this organizational perspective constitutes a promising contribution to debates about integrated risk management. Summing Up: Highly recommended. Students, upper-division undergraduate and up; faculty; professionals; general readers. J. R. Meszaros National Science Foundation

List of abbreviations	p. viii
List of figures	p. x
List of tables	p. xiii
List of boxes	p. xiv
Preface	p. xvii
1 The Strategic nature of corporate risk management	p. 1
1.1 The nature of risk management	p. 1
1.2 The significance of potential risk effects	p. 2
1.3 Different approaches to risk management	p. 11
1.4 Integrating risk management approaches	p. 15
1.5 Does risk management pay?	p. 16
1.6 Effective risk management	p. 21
1.7 Conclusion	p. 30
2 Economic exposures in corporate risk management	p. 33
2.1 Exposures to market risk	p. 33
2.2 Economic exposures	p. 35
2.3 Foreign exchange rate exposures	p. 38
2.4 Interest rate exposures	p. 40
2.5 Interacting effects of market-related risks	p. 45
2.6 Managing complex market exposures	p. 46
2.7 Conclusion	p. 51
3 Managing market-related business exposures	p. 53
3.1 Market-related risk exposures	p. 53
3.2 Various hedging possibilities	p. 54
3.3 The insurance market	p. 54
3.4 Derivative instruments	p. 60
3.5 Capital market instruments	p. 69
3.6 Coordinating risk management approaches	p. 73
3.7 Conclusion	p. 74
4 Extending the risk management perspective	p. 76
4.1 Risk management in all of its aspects	p. 76
4.2 An extended view on risk exposures	p. 78
4.3 Real options and strategic exposures	p. 85
4.4 Real options frameworks	p. 88
4.5 Application of the real options logic: managing innovation in the pharmaceutical industry (external venturing)	p. 92
4.6 Extending the real options perspective	p. 95
4.7 Conclusion	p. 96
5 Integrative risk management perspectives	p. 99
5.1 The need to look across risks	p. 99
5.2 Shortcomings of traditional hedging practices	p. 109
5.3 An integrative approach to other types of risk	p. 112
5.4 Managing the different images of risk	p. 115
5.5 Conclusion	p. 118
6 Current risk management practice and the rise of ERM	p. 120
6.1 Drivers of the new risk paradigm	p. 120
6.2 Risk management practices	p. 123
6.3 ERM-the new risk paradigm	p. 128
6.4 Limitations of the ERM framework	p. 138
6.5 Conclusion	p. 143
7 Strategic risk analyses	p. 146
7.1 Environmental scanning in a predictable world	p. 146
7.2 Scenario planning-a simple technique in an unpredictable world	p. 159
7.3 Adding complexity and uncertainty	p. 167
7.4 Dealing with the unknown	p. 169
7.5 Handling the different images of risk	p. 173
7.6 Conclusion	p. 175
8 Strategic risk management-amendments to the ERM framework	p. 178
8.1 The relationship to corporate strategy	p. 178
8.2 Organizational aspects	p. 180
8.3 Organizational involvement and cultural aspects	p. 187
8.4 Conclusion	p. 198
9 Strategic risk management	p. 200
9.1 Organizing the risk management activities	p. 200
9.2 The integrative strategic risk management process	p. 202
9.3 Organizational structure and risk management	p. 211
9.4 Risk management at If P&C Insurance	p. 215
9.5 Conclusion	p. 223
10 Postscriptum	p. 225
Appendices
Appendix 1 A strategic responsiveness model	p. 233
Appendix 2 Determining the premium on a call option	p. 235
Appendix 3 Determing the value of a real option	p. 237
Index	p. 239

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