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This textbook demonstrates how Enterprise Risk Management creates value in strategic- and decision-making-processes. The author introduces modern approaches to balancing risk and reward based on many examples of medium-sized and large companies from different industries. Since traditional risk management in practice is often an independent stand-alone process with no impact on decision-making processes, it is unable to create value and ties up resources in the company unnecessarily. Herewith, he serves students as well as practitioners with modern approaches that promote a connection between ERM and corporate management. The author demonstrates in a didactically appropriate manner how companies can use ERM in a concrete way to achieve better risk-reward decisions under uncertainty. Furthermore, theoretical and psychological findings relevant to entrepreneurial decision-making situations are incorporated. This textbook has been recommended and developed for university courses in Germany, Austria and Switzerland.

Inhaltsverzeichnis

Frontmatter

Chapter 1. Introducing ERM

Abstract
Enterprise Risk Management (ERM) is an enterprise-wide process with which companies identify, assess and actively manage all key risks in order to generate value for all stakeholders. Based on this definition, the chapter explains which key success criteria constitute modern risk management and what needs to be paid special attention to in practice in order to exploit the potential of ERM to create value. In particular, there is need for reconsideration that financial risks are not the most important risk category in most industrial companies. Furthermore, a positive risk culture is supported if historically grown “risk silos” can be overcome and a uniform ERM language can be established company-wide. If a company manages successfully to consolidate ERM as a self-evident part of the strategy development, strategy execution and decision-making processes, it is capable to unfold its value-generating potential.
Stefan Hunziker

Chapter 2. Countering Biases in Risk Analysis

Abstract
Many risk management programmes in companies are not as effective as they could or should be. This is due to a number of frequently overlooked factors, such as motivational and cognitive biases. The topic of biases, although much theoretical and empirical literature exists, is still rarely addressed in relation to enterprise risk management. Many studies explicitly show that mistakes made in risk identification and risk assessment significantly distort results and decisions drawn from the risk management process. In the following, some of the most important biases in risk analysis and corresponding debiasing strategies are discussed.
Stefan Hunziker

Chapter 3. Creating Value Through ERM Process

Summary
This chapter takes you step by step through the ERM process and presents practical challenges using concrete examples. Robustly developed risk scenarios can challenge management intuition with more rational information on risky decisions. In addition to risk identification and risk assessment, the integration of risk-relevant information into decision-making processes is a key element of value-creating risk management. Level-appropriate, integrated risk reporting suggestions and concepts for continuous improvement of ERM quality complete this chapter.
Stefan Hunziker

Chapter 4. Setting up Enterprise Risk Governance

Abstract
So far, we have discussed the relevance of ERM, the challenges with cognitive and motivational biases and how the ERM process can add value to the company. This chapter covers relevant topics for setting up a adequate risk governance within the company. An sound enterprise risk governance serves as an important basis for implementing an effective ERM process. It addresses external factors influencing the set-up of ERM as corporate governance codes, ERM frameworks, norms and legal requirements. Additionally, internal aspects may play a major role on the effectiveness of ERM such as the corporate risk culture and the definition of roles and responsibilities.
Stefan Hunziker

Chapter 5. Looking at Trends in ERM

Abstract
The preceding explanations describe a modern risk management approach (ERM). This approach is also evolving and must be aligned with the changing business environment. The following chapter describes which ERM trends are in focus and how they change the risk management function. With regard to the topic of digitization, a distinction is made between the risks of digitization and digital transformation and the opportunities that digitization offers for the risk management function. In addition to the topic of digitization, the development of the profile of the risk management professional is also described.
Stefan Hunziker
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