Table of Contents

Introduction xiii
The Ultimate Risk Taker xiii


Exercise: What Is Your Risk IQ? xiv


Chapter 1 What Risk Management Is and Is Not 1


Getting Into the Risk Mentality 1


Exercise: Your Risk 1


No Insurance Selling Allowed 1


Risk Is Something CFOs Often Ignore 2


Anything Can Go Wrong 2


Process for Implementing an Eective Risk Management Program 2


Afford the Cost 2


Analysis of Google’s Risk 3


Relationship of Risk and Risk Taking 4


Innovation and Risk Management 4


Update the Culture 5


Understanding the Innovative and Risk-Taking Organisation 5


Survival Creates Infinite Sources of Risk 6


Summary: Risk Is Ordinary and Expected 6


Chapter 2 The Two Views of Risk 7


Duality of Risk 7


The 34,000 -Foot View 7


Exercise: Questions to Gauge Your Risk Tolerance 8


The 100-Yard View 8


Objective Versus Subjective Risk 9


Personal Risk Spectrum Tool 9


This Spectrum in My Life 11


Individual Risk Taking 11


Summary: Everyone Sees Risk Di erently 12


Chapter 3 Your Firm’s Risk Management Plan 13


Five Stages of Crisis Management 13


Your Risk Management Program 13


Fraud and Risk Management 14


Risk Awareness Prevents Fraud 14


Profits and Risk Management 15


Risk of Financial Loss 15


On-Spot Information Gives Rise to Profit Potential 15


The Risk Champion and Risk Team 16


Your Business Plan Risk 16


Strategic Risk 17


Operational Risk 18


Innovation Risk 19


Practical Solutions for Managing Business Model Risk 20


10½ Rules for Successful Business Risk Taking 20


Summary: Risk Requires a Proactive Plan 21


Chapter 4 Step One—Define Risk 23


Exercise: Defining Risk 23


Taking the First Step 24


What You Will Discover in Step 1 24


Why Defining Risk Is Necessary 25


Practical Solutions for Making People Aware That Risk Exists 25


Case Study Analysis of a Bank’s Evolving Risk Appetite 25


Insurance’s Inadequacy in Risk Management 26


Uninsurable E-Commerce Risk 26


Uninsurable Risk of Doing Business Across the Globe 27


Fostering Risk Awareness Case Studies 27


Analysis of a Financial Company’s Lack of Risk Awareness 27


Risk Awareness Tool 28


Summary: Importance of Step 1 29


Chapter 5 Step Two—Examine Attitudes Toward Risks 31


Exercise: Determine Your Risk Tolerance 31


The Second Step 32


Personal Risks 33


The Uncertainty Domino 33


Motivation Behind Avoiding Risk 34


Lesson of Step 2 34


Your Firm’s Specific Definition of Risk 34


Exercise: Taking a Risk 35


The Mind-Set of the Risk Taking Entrepreneur 36


The Mind-Set of the Risk Averse Person36


Back to Us 36


Case Study 36


Analysis of Royal Bank of Canada Revisited Risk Definition 36


A 10½ Step Plan to Build Your Self-Confidence for Risking 37


10½ Rules of Creative Risk Taking 37


Exercise: Who Is Running the Train? 38


Summary: Importance of Step 2 39


Chapter 6 Step Three—Analyse the Firm’s Ability to Handle Risk 41


Case Study 41


Analysis of Amazon’s Ability to Take Risks 41


Case Studies to Learn From 42


Exercise: Risk Analysis 42


Risk of Weak Accountability 44


Exercise: Accountability Self-Assessment 44


The Source of All Business Risks 46


Risk’s Two Faces 48


Accounting Sits in the Middle 49


The Cultural Aspect of Risk Taking and Risk Management 49


Your Culture Mosaic 50


Visible Clues About Risk in Your Culture’s Norms 50


Morale Is Vital in Risk Awareness 51


Culture Must Never Be Downplayed 51


Case Study 52


Analysis of Culture and Risk 52


Risk Analysis Tools 52


Tools of Risk Identification 52


Tool for Breaking Down a Risk Into Manageable Actions 54


Exercise: What Would You Need? 55


Exercise: Givens, Negotiables, and Controllables 55


In Essence 56


A Culture That Balances Risk Taking and Risk Exposure 56


The Point 57


How to Generate a Balanced Risk Taking Culture 57


Culture’s Impact on Risk Taking 57


Risk Inherent in Your Culture 58


Walk in My Shoes 58


Summary: Importance of Step 3 59


Chapter 7 Step Four—Minimise the Risk Exposure 61


Risk Mitigation Tools 61


Exercise: Risk Strategy Grid 61


Proactive Attitudes 63


Importance of Step 4 64


Balanced Risk Taking Requires Employees Thinking for Themselves 65


Tool to Perform an Authority and Responsibility Analysis 66


Tool to Analyse the Causes of Exposure 68


The Real Risk 70


Exercise: Finding the Root Cause 71


Tool for Isolating the Optimal Solutions 71


Summary: Importance of Step 4 73


Chapter 8 Step Five—Recover From the Negative Results 75


Risk Recovery Tools 76


Tool for Pitfall Planning 76


Exercise: Risk Analysis 77


Contingency Funds in Risk Management 77


Tool for Fostering a Lessons Learned Attitude 78


Exercise: Lessons Learned 78


The Risk Audit 78


Tool for Continuous Learning 80


Case Study 81


Analysis of Mega-Retailer’s Growing Risk 81


CEO Lessons Learned 81


Summary: The Importance of Step 5 82


Chapter 9 Step Five½—Commit to Taking Action 83


The (Never Completed) Last Step 83


Action Plan: Tool for Planning for Risks 84


Tool for Action Plan Reporting and Accountability 86


Summary: The Importance of Step 5½ 88


Chapter 10 Risk Management and the Management Accountant 89


The Demand for Our Risk Awareness 89


Inherent Risk 89


Control Risk 90


Assertion 90


Detection Risk 90


Risk and Path of Least Resistance 90


Where Auditors Need to Look 91


Ways to Alter Employee’s Path of Least Resistance 92


Chapter 11 The Wide World of Risks 93


Risk in Weather 93


Risk in Geopolitics 93


Risk From People Resources 94


Risk From Fraud and Employee Abuses 94


Warning Signs of Situations at Risk for Unethical Behaviours 95


Risk in Your Static Rewards 95


Risk in Employment Compliance 96


Risk in the Technology Dependent Age 96


Risk in Information Security 96


E-Commerce Risk 97


Risk of Sabotage 97


Risk to Personal Data 99


Risk in E-Mail 99


Risk in Internet Privacy 99


Risk of Internet Rumours 100


Summary: The Importance of These Risks 101


Appendix A Tool for Culture Risk Assessment 103


Pressure Point No1: The Growth Factor 103


Pressure Point No2: The Corporate Culture 103


Pressure Point No3: The Management of Information 103


Appendix B Ethics Focus: Business and Industry 105


Ethics Overview 105


Key Ethical Dilemmas 105


Glossary of Controllership and Financial Management Terms 107

About the Author

Ron Rael, CPA, CGMA, is a thought leader for the CPA profession on leadership and CFO/Controllership topics. He is the CEO of the High Road Institute, a leadership development organization. Ron has authored content on topics such as professionalism, customer service, budgeting, accountability, governance, risk management, and strategic planning. He has coached more than 10,000 accounting professionals in organizations and leadership teams throughout the United States and Canada.


Ron’s industry experience comes from working in two large corporations, as well as from leading accounting teams in numerous closely held businesses.