Acknowledgments xiii
Foreword xv
Preface xix
Introduction xxi
Conventional Risk Management xxi
A Risk Intelligent Approach xxii
The Approach of This Book xxiii
The Structure of This Book xxv
Part I When Risks Become Brutal Realities 1
Chapter 1 To Survive and Thrive: A Matter of Judgment 3
The Revolving Door to the Corner Office 4
Barriers to Board Effectiveness 8
The Imperatives of the Enterprise 11
Chapter 2 Conventional Risk Management Has Failed 17
What Goes Up Must Come Down 19
The Evolution of Finance, Market, and Risk Management Theory 24
Taking a (Random) Walk 26
Chapter 3 An Unconventional Approach to Risk Management 33
Calculated Risk Taking Creates Value 35
Calculated Risk Taking and Risk Aversion 44
Risk Intelligence: An Unconventional Approach 46
Part II Ten Essential Risk Intelligence Skills 51
Chapter 4 Check Your Assumptions at the Door 53
Fatal Flaw #1: Failing to Challenge Your Assumptions 55
Risk Intelligence Skill #1: Check Your Assumptions at the Door 61
Chapter 5 Maintain Constant Vigilance 73
Fatal Flaw #2: Lack of Vigilance 73
Risk Intelligence Skill #2: Maintain Constant Vigilance 83
Chapter 6 Factor in Velocity and Momentum 93
Fatal Flaw # 3: Failure to Consider Velocity and Momentum 95
Risk Intelligence Skill #3: Factor in Velocity and Momentum 101
Chapter 7 Manage the Key Connections 111
Fatal Flaw #4: Failure to Make Key Connections and Manage Complexity 112
Risk Intelligence Skill #4: Manage Your Key Connections 117
Chapter 8 Anticipate Causes of Failure 131
Fatal Flaw #5: Failure to Anticipate Failure 132
Risk Intelligence Skill #5: Anticipate Causes of Failure 137
Chapter 9 Verify Sources and Corroborate Information 149
Fatal Flaw #6: Failure to Verify Sources and Corroborate Information 150
Risk Intelligence Skill # 6: Verify Sources and Corroborate Information 158
Chapter 10 Maintain a Margin of Safety 165
Fatal Flaw #7: Failing to Maintain a Margin of Safety 166
Risk Intelligence Skill #7: Maintain a Margin of Safety 170
Chapter 11 Set Your Enterprise Time Horizons 183
Fatal Flaw #8: Short-Termism 184
Risk Intelligence Skill #8: Set Your Enterprise Time Horizons 190
Chapter 12 Take Enough of the Right Risks 203
Fatal Flaw #9: Failure to Take Enough of the Right Risks 204
Risk Intelligence Skill #9: Taking Enough of the Right Risks 208
Chapter 13 Sustain Operational Discipline 219
Case Example: The U.S. Submarine Force 220
Fatal Flaw #10: Lack of Operational Discipline 222
Risk Intelligence Skill #10: Develop and Sustain Operational Discipline 227
Part III Creating the Risk Intelligent Enterprise 235
Chapter 14 Risk Intelligence Is Free 237
A Closer Look at Costs 239
The Rewards of Risk Intelligence 253
Chapter 15 Risk Intelligent Governance 257
The Risk Intelligent Board 258
Committees of the Board and Risk Intelligence 271
Where Does Risk Oversight End and Risk Management Begin? 277
Chapter 16 Risk Intelligent Enterprise Management 281
ERM and Risk Intelligence 282
Developing Risk Intelligent Enterprise Management 284
Act as One 287
A New Way of Doing Business 291
Chapter 17 The Way Forward: Creating the Risk Intelligent Enterprise 293
The Benefits of Improved Risk Intelligence 294
What’s Your Enterprise Risk IQ? 295
Making the Transformation 298
Conclusion 304
Notes 307
About the Authors 325
Index 327
FREDERICK FUNSTON is a principal with Deloitte & Touche LLP and has more than thirty years of experience working with leaders of numerous global companies. In 2000, Rick created the concept of risk intelligence for value creation and value protection. He is a frequent speaker and writer on leveraging risk intelligence for competitive advantage in complex, global organizations.
STEPHEN WAGNER is a nationally recognized thought leader on corporate governance. In 2009, Steve retired as the managing partner of Deloitte LLP's Center for Corporate Governance, where he led the firm's integrated strategy for governance services. He is a frequent speaker at governance conferences and directors' colleges and has authored or contributed to numerous articles on governance and risk.
"The authors propose a more holistic approach of "risk intelligence," in which leaders acknowledge and prepare for a wide range of potential threats. The authors isolate ten essential risk intelligence skills-such as abandoning familiar assumptions, anticipating causes of failure, and sustaining operational discipline-and provide in-depth guidelines for how executives and board members can hone these skills. They understand that there is no reward without risk - but only if the risks are properly managed." (BizEd, July/August 2010)
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