Monday, May 13, 2013

Corporate Value of Enterprise Risk Management: The Next Step in Business Management 1st edition, Sim Segal


The framework outlined in this book simply works and I know this from personal experience at a Fortune 500 company. Segal's approach is effective because it essentially employs an intuitive approach that builds "automatic" buy-in from key stakeholders while also providing powerful output and decision-making tools.

When I've spoken to ERM practitioners at other companies and hear of their problems, challenges, etc, I often think if they'd only taken this approach they'd be much farther along and in a better place.

I personally believe that a "reverse-engineered" view sometimes helps in the design of an ERM framework. For example, you look at risk metrics from the point of view of "end users" and what the key stakeholders want to know, what they ask, etc. Then you can build a methodology or process that allows you to attain these metrics as typical output of your risk quantification process. Segal's methodology is well suited for such an approach. This book provides a strong basis for risk quantification but also risk identification as well.

Depending on the stage and strengths of your ERM program you can pick and choose what aspects of the approach to adopt. If you are looking for everything from infrastructure to process to risk messaging and strategic decision-making I say you'll find it here.

The intuitive appeal of the risk ID and quantification processes is perhaps the biggest benefit and, as I said, it builds buy-in from the start and gets you on your way to a healthy risk culture which must underpin any effective ERM program.

This is a good book, easy to read, well written.
People who want to learn more about the practical implementation of risk management programs
will find inside a relevant content.

I have read many, many books on Enterprise Risk Management and Risk Management and this is the best of them all. Many of the other books on the subject are more philosophical and theoretical whereas Sim's book can actually be applied immediately, which is what I'm doing currently.

Not only is it actionable, the entire concept of corporate value of enterprise risk management is extremely sound if not revolutionary. The use of company value (or other baseline metrics that for example, a non-profit would choose) as the baseline metric solves many issues with traditional ERM programs. These include the inability to quantify strategic and operational risks, the unclear definition of risk appetite, and the lack of integration of ERM into decision making. If you aren't making decisions as a result of your ERM program, then what value are you providing?

Every section of this book has insightful learning for everyone. From the creation and use of the risk categorization and definition (RCD) tool, to qualitative assessments, to risk quantification, to decision making, to disclosure, to governance,... there are solid methods throughout the entire book.

I highly recommend this book whether you already have an ERM program in place, like I do, or if you are just starting out. Enjoy!

I was lucky enough to get my hands on a copy of this book the week it was published. I have to say, I agree with Dave Ingram's quote on the back cover that this may very well be the only ERM book you will ever need.

This is a practical book that will give the reader an education that can be applied to real risk management challenges. So many books on subjects such as ERM seem to dance around the main points without giving the reader enough information to actually do anything with it. Not so with this one. Segal masterfully lays out his definitions of risk and ERM early in the book, lays out the fundamentals of the value based ERM framework and how it overcomes the three core challenges to ERM implementation. Those three core challenges are:

1. Inability to quantify strategic and operational risks
2. Unclear definition of risk appetite
3. Lack of integration of ERM into decision making

Segal's approach to ERM does indeed overcome those challenges. He goes on to discuss how to actually design and implement a framework and how to use ERM to improve the value of an organization to its stakeholders. Segal is not saying there is only one right way to do ERM - that just isn't true - he is showing you how to think about it and how to approach it so that you can design and implement a succesful ERM program that meets your organization's challenges. I also really like the way he stresses that one should not fall down the rabbit hole of building beautiful sophisticated detailed models that do not add value commensurate with the effort involved in constructing them, or that provide what I call "delusional exactitude". He makes it very clear that the whole point of ERM is management, not modeling (though you need models of some sort); ERM is useless if it does not assit in decision making and add value to the enterprise, and this should never be forgotten by those directing the ERM process.

The book is broken up into three coherent parts: I. Basic ERM Infrastructure, II. ERM Process Cycle, and III. Risk Governance and Other Topics. This makes the book extremely readable and suitable for both classroom instruction, self study, or as a reference.

It should also be noted that this book is NOT targeted to a specific business sector. The ERM framework discussed in this wonderful book is suitable for firms in any sector, as well as non-corporate entities (such as public entities, charitable organizations, associations, other non-profits, etc.).

I am passionate about this subject, as evidenced by the fact that I am the current chair of the program committee for a global conference on ERM ([...]) and am involved in writing standards of practice for actuaries engaged in ERM work. I have read a lot about ERM and even written a little bit about it myself. This truly is the best book on the topic that I have seen to date and I highly recommend it for both experieinced practitioners and those new to the subject.

"My only regret with this book is that it was not available when I began developing an ERM capability five years ago at our company. Sim provides a comprehensive and straight forward approach to ERM that can be used by risk management novices developing an ERM function or by seasoned risk management professionals looking to move their ERM capability to the next level of maturity."

I could not agree more with Dave Ingram, when he says, in the foreword of "The Corporate Value of Enterprise Risk Manager", that this could be the only ERM book you will ever need.

The book offers an integrated road map for risk management, written in a very comprehensive way, and I believe that every risk practitioners (beginner or experienced risk executive) will find some interesting and "fresh" material.

The book is also wide ranged, meaning that if you want theoretical concepts, you will find them, but it is also a very good "implementation guide".

Finally, I will stress that this is not only a book on ERM, but mainly on the corporate value of it.

The book of Sim Segal is highly recommendable.

Product Details :
Hardcover: 432 pages
Publisher: Wiley; 1 edition (March 8, 2011)
Language: English
ISBN-10: 0470882549
ISBN-13: 978-0470882542
Product Dimensions: 6.3 x 1.4 x 9.4 inches

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