Surviving and Thriving in Uncertainty

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