ERM - Enterprise Risk Management Issues and Cases

A wealth of international case studies illustrating current issues and emerging best practices in enterprise risk management

Despite enterprise risk management's relative newness as a recognized business discipline, the marketplace is replete with guides and references for ERM practitioners. Yet, until now, few case studies illustrating ERM in action have appeared in the literature. One reason for this is that, until recently, there were many disparate, even conflicting definitions of what, exactly ERM is and, more importantly, how organizations can use it to utmost advantage. With efforts underway, internationally, to mandate ERM and to standardize ERM standards and practices, the need has never been greater for an authoritative resource offering risk management professionals authoritative coverage of the full array of contemporary ERM issues and challenges. Written by two recognized international thought leaders in the field, ERM-Enterprise Risk Management provides that and much more.

• Packed with international cases studies illustrating ERM best practices applicable across all industry sectors and business models
• Explores contemporary issues, including quantitative and qualitative measures, as well as potential pitfalls and challenges facing today's enterprise risk managers
• Includes interviews with leading risk management theorists and practitioners, as well as risk managers from a variety of industries
• An indispensable working resource for risk management practitioners everywhere and a valuable reference for researchers, providing the latest empirical evidence and an exhaustive bibliography

Professor Jean-Paul Louisot, ARM, FIRM, holds a mining engineer degree, a Master in Economics and an MBA from the Kellogg School of Management and is a member of Beta Gamma Sigma. He has worked in risk management for nearly forty years, as a broker, an underwriter and a risk-manager. Since 1993, his activity focuses on teaching and coaching post graduate students and risk management professionals, while still acting as a part-time risk manager for several clients developing ERM programs. As curriculum director for CARM_Institute, Ltd, he supervises the ARM and EFARM (European Fellow in Applied Risk Management) programmes. After nine years at Paris 1 Panthéon Sorbonne University, he now teaches postgraduate courses in Risk Management at the Institut Catholique de Lille and in various universities, including the IACA in Vienna. He is a frequent speaker in professional conferences in Europe, in Australia, and in the USA. He has published a number of articles and studies on risk management and developed the first edition of the ERM course at The Institutes (ARM 57). He is currently working on his Doctorat en sciences de Gestion at University Paris 1 Panthéon Sorbonne and plans to complete the process in 2014.

Christopher H. Ketcham, Ph.D., CPCU, recently retired as Visiting Assistant Professor at the University of Houston Downtown College of Business Insurance and Risk Management department. While at UHD, Chris developed and taught seven courses for the new online curriculum for insurance and risk management undergraduate majors in this AACSB accredited school. Chris consults with industry and the independent insurance agent community on areas of practical risk management, ethics, and strategic planning. With Jean-Paul Louisot he was co-editor of the first edition of the textbook Enterprise-Wide Risk Management: Developing and Implementing published by The Institutes for their ARM-E designation. Chris’s work in ethics extends to issues associated with emerging technologies such as private space exploration.

Contributor List vii

About the Editors ix

Acknowledgements x

Introduction xi

ISO 31000 and Guide 73: 2009 Select Terms and Their Definitions xvii

PART I ERM ARTICLES 1

1 Establishing the Internal and External Contexts 3

1.1 Managing Risks to Enable Strategy 3
Jean-Paul Louisot and Christopher Mandel

1.2 Strategy, Constraint, Risk Management and the Value Chain 12
Christopher Ketcham and Kevin W. Knight

1.3 The Risk of Group Decision Making within Organizations: A Synthesis 19
Daniel A. Gaus

2 Risk Assessment 41

2.1 Risk Quantification: Cornerstone for Rational Risk Management 41
Jean-Paul Louisot, Laurent Condamin and Patrick Naim

2.2 Brief Overview of Cindynics 48
Georges-Yves Kervern and Jean-Paul Louisot

2.3 Risk Assessment or Exposure Diagnostic 56

2.4 Managing the Collection of Relevant Data for an ERM Program: The Importance of Efficient and Neutral Questionnaires 84
Sophie Gaultier-Gaillard

2.5 Enterprise Risk Analytics Systems 96
Richard Connelly and Jean-Paul Louisot

2.6 Emerging Enterprise Risks Facing the US Healthcare Industry 103

3 Select and Implement the Appropriate Risk Management Technique 109

3.1 Risk to Reputation 109
Sophie Gaultier-Gaillard, Jean-Paul Louisot and Jenny Rayner

3.2 Disturbance Management 123
Jean-Paul Louisot

4 Monitor Results and Revise 135

4.1 Business Ethics and Risk Management 135
Marc Ronez

4.2 Governance, Risk, Compliance: The New Paradigm of Risk Management 146
Jean-Paul Louisot

5 Communicate and Consult 155

5.1 Communication as a Risk Mitigation Tool 155
Jean-Paul Louisot

PART II CASE STUDIES 163

6 Case Study Protocol 165

7 Case Study: Risk Management Implementation in China 167
Duojia (Doug) Lu

8 Case Study: Agreeing Upon the Scope of the Project and the Job of the ERM Risk Manager 187
Christopher Ketcham

9 Case Study: Wellcome Trust 191
Fiona Davidge Interviewed by Jean-Paul Louisot

10 Case Study: Large Health Insurer in the US 199
Anonymous Interviewed by Christopher Ketcham

11 Case Study: Three Steps for Bringing Risk Management Back in House 217
Renee Reimer Interviewed by Christopher Ketcham

12 Case Study: University of California 229
Grace Crickette Interviewed by Christopher Ketcham

13 Case Study: Managing Risk at the OPAC du Rhone 241
Samiha Viand Interviewed by Jean-Paul Louisot

ERM References for Practitioners 249

Further Reading 253

Index 255

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