The Two Headed Coin

Preface: Risk is Good and Uncertainty is the Reality! xi

Acknowledgments xxv

About the Authors xxix

Chapter 1 Strategy and Risk: Two Sides of the Same Coin 1

Strategic Positioning and Risk 6

Strategy and Risk in a Start-Up 7

Chapter 2 Executing on the Plan and Discovering New Risks 17

The Assumption of Goal Congruence and the Importance of Culture 21

Conclusion 27

Chapter 3 Which Risks to Keep 31

Strategic Positioning and Risk Governance 38

How Does Risk Management Help Close the Gap Between Strategy Formulation and Execution? 40

Conclusion: Embracing and Managing Risk 42

Chapter 4 How Do We Achieve Independent Risk Governance and Improve Performance? 47

What Do We Mean by ERM? 51

Chapter 5 Who Has the Specific Knowledge to Design the Risk Architecture? Why You Need an Independent Risk Function 61

The Strategy-Risk-Governance Process 61

Meeting the Objective and the Categorization of Risks 69

The Risk Architecture 71

Creation of a Risk Function 73

Conclusion 76

Chapter 6 Enterprise Risk Management and Competitive Advantage 79

How Does Strategy Affect Randomness? 86

Chapter 7 What Reputation Do We Want? With Whom? 91

Managing Reputation Risk 99

Chapter 8 Uncertainty, Scenario Planning, and Real Options 105

Real Options 113

Conclusion 116

Chapter 9 Risk Culture and Ethics: Can You Have Excellence and Consistency at the Same Time? 121

The Advisor-Customer Encounter 124

Control Systems, Discretion, and Ethics 127

Culture, Ethics, Performance, and Risk Management 135

Chapter 10 The Top of the Pyramid: The CEO as Integrator of Strategy and Risk and the Board as the Fourth Line of Defense 141

The CEO: The Operational Integration of Strategy and Risk 145

The Board: The Governance Integration of Strategy and Risk 145

The Board Provides More Than Oversight 146

Epilogue: Decision-Making at the Restaurant: Creating and Executing a Risk-Aware Strategy 151

Appendix I: Risk Transformation and the Need for an Integrated Risk Approach 157

Appendix II: Resiliency 161

Bibliography 167

Index 183