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Making Enterprise Risk Management Pay Off
How Leading Companies Implement Risk Management
Thomas L. Barton William G. Shenkir
Paul L. Walker
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Credits
Editorial/Production Supervision: KATHLEEN M. CAREN Acquisitions Editor: JIM BOYD Marketing Manager: BRYAN GAMBREL Manufacturing Manager: MAURA ZALDIVAR Cover Design: TALAR BOORUJY
©2002 Financial Executives Research Foundation, Inc. Published by Financial Times/Prentice Hall PTR Pearson Education, Inc. Upper Saddle River, NJ 07458 Prentice Hall books are widely used by corporations and government agencies for training, marketing, and resale. The publisher offers discounts on this book when ordered in bulk quantities. For more information, contact: Corporate Sales Department, Phone: 800-382-3419; Fax: 201-236-7141; E-mail: [email protected]; or write: Prentice Hall PTR, Corp. Sales Dept., One Lake Street, Upper Saddle River, NJ 07458. All rights reserved. No part of this book may be reproduced, in any form or by any means, without permission in writing from the publisher. Printed in the United States of America 10 9 8 7 6 5 4 3 2 1 Pearson Education LTD. Pearson Education Australia PTY, Limited Pearson Education Singapore, Pte. Ltd. Pearson Education North Asia Ltd. Pearson Education Canada, Ltd. Pearson Educatión de Mexico, S.A. de C.V. Pearson Education—Japan Pearson Education Malaysia, Pte. Ltd. Pearson Education, Upper Saddle River, New Jersey
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Contents
1 Introduction
An Abundance of Uncertainty
New Risk Management Paradigm
Studies of Risk Management
Objectives and Approach of This Study
Organization of This Study
2 Lessons Learned From Case Studies
Risk Identification Process
Risk Measurement
Risk Response Strategies
Risk Integration
Use of Consultants
Driving Risk Awareness Throughout the Organization
Risk Infrastructure
Champions of Enterprise-wide Risk Management
Concluding Comments
3 Chase Manhattan Corporation
Company Background
Chase Manhattan Today
Risk at Chase Manhattan
Shareholder Value-Added
Market Risk
Credit Risk
Operating Risk
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Case Summary
People Interviewed
References
4 E.I. du Pont de Nemours and Company
Company Background
Current Status of Risk Management
Risk Integration
Focus on Earnings
Becoming World Class in Financial Risk Management
Case Summary
People Interviewed
5 Microsoft Corporation
Company Background
Risk Management Group
Business Risk Management
Identifying Business Risks Through Scenario Analysis
Measuring and Prioritizing Business Risk
Awards for Risk Management
Case Summary
People Interviewed
6 United Grain Growers Limited
Company Background
The Road to Enterprise-wide Risk Management
Strategic Risk Management Project
Integrated Risk Financing
Risk Management Infrastructure
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Case Summary
People Interviewed
Reference
7 Unocal Corporation
Company Background
Unocal in 2000
The Nature of Risk at Unocal
Deepwater Operations
Origins of Enterprise-wide Risk Management
Risk Profiles
Risk Management as Cultural Change
Case Summary
People Interviewed
References
8 Conclusion
The Study Companies
Elements of Risk Management
The Future
Assessing Your Organization
Summary
APPENDICES A Enterprise-wide Risk Management Interview Protocol B References C Annotated Bibliography About the Authors Acknowledgments
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Advisory Committee
Arnold H. Kaplan (Chairman) Chief Financial Officer UnitedHealth Group Peter G. M. Cox Chief Financial Officer United Grain Growers Limited Gracie F. Hemphill Director—Research Financial Executives Research Foundation, Inc. Karl A. Primm General Auditor Unocal Corporation William M. Sinnett Project Manager Financial Executives Research Foundation, Inc.
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Financial Times Prentice Hall Books
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