Surviving and Thriving in Uncertainty: Creating The Risk Intelligent Enterprise

by Frederick Funston, Stephen Wagner

Overview

Why can't the cycle of scandal, speculation, greed, and recklessness be broken? With countless sums spent on enterprise risk management, why does it consistently fail at critical junctures? How can you hope to manage that? In a sense, you can't—not in the way you can manage a production facility or a sales force. Conventional risk management, though necessary, is concerned mainly with avoiding risk and protecting existing assets—and simply isn't enough for the survival of your organization.

Starting with a Foreword by the Honorable Tom Ridge—the nation's first Secretary of the Department of Homeland Security—Surviving and Thriving in Uncertainty: Creating the Risk Intelligent Enterprise reveals demonstrated methods you can use to help exercise better judgment and make better decisions under the most risky, uncertain, and turbulent conditions.

Based on their combined decades of experience as practitioners, consultants, and advisors to numerous business professionals throughout the world, recognized industry veterans and authors Frederick Funston and Stephen Wagner look at:

• Perspectives of those who work in risk, from business directors and senior executives to combat pilots, first responders, race car drivers, and astronauts
• How you can use risk management tools proactively instead of reactively to improve decision making
• The ten fatal flaws in conventional risk management . . .
• . . . And their ten corresponding enterprise risk intelligence skills
• Why doing business based on tradition, habit, or on autopilot can mean your business's downfall

This book reveals risk management to be an integral part of value creation and preservation. Get smart in your approach to risk with the timely and relevant guidance found in Surviving and Thriving in Uncertainty: Creating the Risk Intelligent Enterprise.

Product Details

ISBN-13:	9780470617489
Publisher:	Wiley
Publication date:	06/03/2010
Sold by:	JOHN WILEY & SONS
Format:	eBook
Pages:	368
File size:	2 MB

About the Author

FREDERICK FUNSTON is a principal with Deloitte & Touche LLP and has more than thirty years of experience working with leaders of numerous global companies. In 2000, Rick created the concept of risk intelligence for value creation and value protection. He is a frequent speaker and writer on leveraging risk intelligence for competitive advantage in complex, global organizations.

STEPHEN WAGNER is a nationally recognized thought leader on corporate governance. In 2009, Steve retired as the managing partner of Deloitte LLP's Center for Corporate Governance, where he led the firm's integrated strategy for governance services. He is a frequent speaker at governance conferences and directors' colleges and has authored or contributed to numerous articles on governance and risk.

Table of Contents

Acknowledgments xiii

Foreword xv

Preface xix

Introduction xxi

Conventional Risk Management xxi

A Risk Intelligent Approach xxii

The Approach of This Book xxiii

The Structure of This Book xxv

Part I When Risks Become Brutal Realities 1

Chapter 1 To Survive and Thrive: A Matter of Judgment 3

The Revolving Door to the Corner Office 4

Barriers to Board Effectiveness 8

The Imperatives of the Enterprise 11

Chapter 2 Conventional Risk Management Has Failed 17

What Goes Up Must Come Down 19

The Evolution of Finance, Market, and Risk Management Theory 24

Taking a (Random) Walk 26

Chapter 3 An Unconventional Approach to Risk Management 33

Calculated Risk Taking Creates Value 35

Calculated Risk Taking and Risk Aversion 44

Risk Intelligence: An Unconventional Approach 46

Part II Ten Essential Risk Intelligence Skills 51

Chapter 4 Check Your Assumptions at the Door 53

Fatal Flaw #1: Failing to Challenge Your Assumptions 55

Risk Intelligence Skill #1: Check Your Assumptions at the Door 61

Chapter 5 Maintain Constant Vigilance 73

Fatal Flaw #2: Lack of Vigilance 73

Risk Intelligence Skill #2: Maintain Constant Vigilance 83

Chapter 6 Factor in Velocity and Momentum 93

Fatal Flaw # 3: Failure to Consider Velocity and Momentum 95

Risk Intelligence Skill #3: Factor in Velocity and Momentum 101

Chapter 7 Manage the Key Connections 111

Fatal Flaw #4: Failure to Make Key Connections and Manage Complexity 112

Risk Intelligence Skill #4: Manage Your Key Connections 117

Chapter 8 Anticipate Causes of Failure 131

Fatal Flaw #5: Failure to Anticipate Failure 132

Risk Intelligence Skill #5: Anticipate Causes of Failure 137

Chapter 9 Verify Sources and Corroborate Information 149

Fatal Flaw #6: Failure to Verify Sources and Corroborate Information 150

Risk Intelligence Skill # 6: Verify Sources and Corroborate Information 158

Chapter 10 Maintain a Margin of Safety 165

Fatal Flaw #7: Failing to Maintain a Margin of Safety 166

Risk Intelligence Skill #7: Maintain a Margin of Safety 170

Chapter 11 Set Your Enterprise Time Horizons 183

Fatal Flaw #8: Short-Termism 184

Risk Intelligence Skill #8: Set Your Enterprise Time Horizons 190

Chapter 12 Take Enough of the Right Risks 203

Fatal Flaw #9: Failure to Take Enough of the Right Risks 204

Risk Intelligence Skill #9: Taking Enough of the Right Risks 208

Chapter 13 Sustain Operational Discipline 219

Case Example: The U.S. Submarine Force 220

Fatal Flaw #10: Lack of Operational Discipline 222

Risk Intelligence Skill #10: Develop and Sustain Operational Discipline 227

Part III Creating the Risk Intelligent Enterprise 235

Chapter 14 Risk Intelligence Is Free 237

A Closer Look at Costs 239

The Rewards of Risk Intelligence 253

Chapter 15 Risk Intelligent Governance 257

The Risk Intelligent Board 258

Committees of the Board and Risk Intelligence 271

Where Does Risk Oversight End and Risk Management Begin? 277

Chapter 16 Risk Intelligent Enterprise Management 281

ERM and Risk Intelligence 282

Developing Risk Intelligent Enterprise Management 284

Act as One 287

A New Way of Doing Business 291

Chapter 17 The Way Forward: Creating the Risk Intelligent Enterprise 293

The Benefits of Improved Risk Intelligence 294

What’s Your Enterprise Risk IQ? 295

Making the Transformation 298

Conclusion 304

Notes 307

About the Authors 325

Index 327

Editorial Reviews

"The authors propose a more holistic approach of "risk intelligence," in which leaders acknowledge and prepare for a wide range of potential threats. The authors isolate ten essential risk intelligence skills-such as abandoning familiar assumptions, anticipating causes of failure, and sustaining operational discipline-and provide in-depth guidelines for how executives and board members can hone these skills. They understand that there is no reward without risk - but only if the risks are properly managed." (BizEd, July/August 2010)

From the Publisher