Praise for Strategic Risk Management
The authors of Strategic Risk Management: New Tools for Competitive Advantage in an Uncertain Age have produced a well-written, entertaining, and thought-provoking compendium of ideas and stimulating insights into strategic planning and the related risk management implications. There is a wealth of interesting risk management case studies in well-known organizations to demonstrate their views. I thoroughly enjoyed reading this and believe it will be helpful to all risk managers and executives to assess and possibly rethink their own methodologies.
John Fraser, former Chief Risk Officer, Hydro One Networks Inc.
Technology has made the world smaller and more unified, but it has also created a fragmented and complex environment for business. Volatility, ambiguity, and uncertainty face todays business leaders. This book takes a thoughtful and insightful look at strategic risk managementspecifically, the gap between those formulating strategy and those who are providing the execution layers. For any business leader looking for a competitive advantage, this book will provide you with real-life examples of those who have found a way to make it happen.
Mike Petroff, business executive and MBA professor
A groundbreaking book for executives that provides the missing piece for solving the strategic planning puzzle!
Corey Gooch, Senior Director, Ankura
Strategic Risk Management: New Tools for Competitive Advantage in an Uncertain Age is the essential text for understanding the concept and practice of strategic risk management. Through clear definitions of risk terminology and application of concepts, to engrossing real-life examples from Yogi Berra to Walt Disney and from Intel to ESPN, the well-pedigreed authors have provided a rich source of information that can help all risk practitioners add value to their organization.
Ken Baker, Corporate Manager, ERM, City of Edmonton
PAUL C. GODFREY, EMANUEL LAURIA, JOHN BUGALLA, AND KRISTINA NARVAEZ
STRATEGIC RISK MANAGEMENT
NEW TOOLS FOR COMPETITIVE ADVANTAGE IN AN UNCERTAIN AGE
Strategic Risk Management
Copyright 2020 by Paul C. Godfrey, Emanuel V. Lauria, John A. Bugalla, Kristina L. Narvaez
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First Edition
Hardcover print edition ISBN 978-1-5230-8695-5
PDF e-book ISBN 978-1-5230-8696-2
IDPF e-book ISBN 978-1-5230-8697-9
Digital audio ISBN 978-1-5230-8699-3
2019-1
Cover Design: Rob Johnson, Toprotype.com
Interior design and composition: Seventeenth Street Studios
Copy editing: Todd Manza
Photo & illustration credits: see Credits page
For RobinPCG
For MarshaJAB
For GeriEVL
For Kevin, Katelyn, Korryn, Kristyn, and KameronKLN
CONTENTS
PREFACE
T his book traces its origin to the connecting skills of Kristina Narvaez. Kristina began working with John Bugalla in 2010 at an enterprise risk management (ERM) workshop. They started discussing the potential impacts that the then new Securities and Exchange Commission Rule 33-9089 and Dodd-Frank Section 165(c) would have on how the C-suite would report their risk management practices to the board of directors. What followed was a decadelong collaboration that has produced two dozen articles in a wide range of publications, including two books. The major themes of our articles are the role of ERM within corporate governance structures and need to link risk management with corporate strategy.
John and Manny Lauria share a common history, having worked together many years ago in the Chicago office of the insurance broker Marsh & McLennan. Both shared a passion for serving large multinational clients and relished the challenge of developing original, creative risk management solutions to seemingly intractable challenges. Building on that experience, the two have more recently collaborated on numerous articles and consulting projects that inform and assist firms motivated to explore the move from ERM to strategic risk management (SRM). Their work reflects the practical realities of making the linkage between corporate strategy and risk management, the importance of getting strategic risk communication right at the board level, how to evaluate emerging risks, and how SRM can narrow the strategyexecution performance gap.
Kristina met Paul Godfrey in 2015, when she began teaching strategy courses at Brigham Young University, where Paul works. They connected over the power of risk management thinking to frame and understand many of the strategic choices that executives made. Dr. Godfreys academic research focused on how risk management thinking could explain and justify why firms engage in philanthropy and various forms of corporate social responsibility. These activities provide firms with something like an insurance policy, a reservoir of goodwill among stakeholder groups, which they can draw upon when bad things happen. He and his colleagues showed that firms engaging in corporate social responsibility weathered the financial shocks of crises better than firms without such insurance.
As she does so well, Kristina connected all of us, and we began talking about our vision of risk management and its importance for firms. Those conversations revealed two common perspectives. First, risk management logic and thinking are powerful tools for crafting and implementing better strategy. Executives who link risk and strategy create a stronger, more defensible, and more durable competitive advantage. We also posited that the risk management function, when properly deployed, provides executives with a way to execute strategy more effectively.