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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 to identify, assess, and manage all key risks. The goal is to generate value for all stakeholders. Based on this definition, the chapter explains which key success criteria constitute modern risk management. We learn what needs to be paid special attention to in practice to exploit the potential of ERM to create value. In particular, we discuss that financial risks are not the most important risk category in most industrial companies. Further, positive risk culture is supported if historically grown “risk silos” can be overcome. Risk managers need to establish a uniform ERM language across the company. Companies need to understand ERM as a self-evident part of the strategy development, strategy execution, and decision-making. Then, ERM 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 many overlooked factors, such as motivational and cognitive biases. The topic of biases, although much theoretical and empirical literature exists, is rarely addressed in ERM. Many studies show that mistakes made in risk identification and risk assessment distort results. Also, decisions drawn from the risk management process may be suboptimal. In the following, we discuss some of the most important biases in risk analysis. We introduce corresponding debiasing strategies.
Stefan Hunziker

Chapter 3. Creating Value Through ERM Process

Abstract
This chapter takes you step-by-step through the ERM process. It presents practical challenges using concrete examples. Robust risk scenarios form the basis to challenge management intuition. They offer more rational information on risky decisions. Risk identification and risk assessment are important ERM steps. Yet, risk managers add value with risk-relevant information in decision-making processes. Also, meaningful risk reporting can support decision-making. We complete the chapter with some tips on continuous ERM improvement.
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. We elaborated on how the ERM process can add value to the company. This chapter covers relevant topics for setting up adequate risk governance. A sound enterprise risk governance serves as an important basis for implementing effective ERM. It addresses external factors influencing the set-up of ERM. Corporate governance codes, ERM frameworks, norms, and legal requirements all have an impact on ERM. Also, internal aspects may play a major role in the effectiveness of ERM. We will have a closer look at corporate risk culture and roles, responsibilities, and tasks.
Stefan Hunziker

Chapter 5. Looking at Trends in ERM

Abstract
The preceding chapters describe a modern risk management approach (ERM). Yet, ERM is evolving. ERM 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. On the topic of digitization, we make an important distinction. We touch on the risks of digitization and digital transformation. In addition, we have a look at the opportunities that digitization offers for modern ERM. Besides the topic of digitization, we have a closer look at important skills and competencies for future risk managers.
Stefan Hunziker
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