Discover the interplay between strategy and risk in this insightful new resource from two experts in the financial industry who have applied their knowledge to multiple industries
In The Two Headed Coin, accomplished authors James L. Darroch and David Wm. Finnie deliver an insightful exploration of the interplay between strategy and risk that underlies the operational framework of successful organizations. You'll learn which risks are fundamental to the strategic positioning and goals of your organization and which are not. You'll also discover the importance of an independent risk function, e,g., the CRO, and its invaluable role as part of the strategic process.
You'll also find:
- A thorough discussion of the notion of competitive advantage and how it relates to risk
- An exploration of consumer perception and reputation as an asset to be managed
- How to use scenario planning and real options to provide a framework for managing uncertainty
- How a focus on culture and ethics can minimize the risk of large losses due to adverse behaviors
Perfect for risk management and strategy professionals The Two Headed Coin will also earn a place in the libraries of executives and managers who wish to improve their ability to integrate strategic and risk thinking to create competitive advantage.
Table of Contents
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
