Chapman | Simple Tools and Techniques for Enterprise Risk Management | Buch | 978-1-119-98997-4 | sack.de

Buch, Englisch, 688 Seiten, Format (B × H): 175 mm x 250 mm, Gewicht: 1329 g

Chapman

Simple Tools and Techniques for Enterprise Risk Management


2. Revised Auflage 2011
ISBN: 978-1-119-98997-4
Verlag: Wiley

Buch, Englisch, 688 Seiten, Format (B × H): 175 mm x 250 mm, Gewicht: 1329 g

ISBN: 978-1-119-98997-4
Verlag: Wiley


Your business reputation can take years to build—and mere minutes to destroy

The range of business threats is evolving rapidly but your organization can thrive and gain a competitive advantage with your business vision for enterprise risk management. Trends affecting markets—events in the global financial markets, changing technologies, environmental priorities, dependency on intellectual property—all underline how important it is to keep up to speed on the latest financial risk management practices and procedures.

This popular book on enterprise risk management has been expanded and updated to include new themes and current trends for today's risk practitioner. It features up-to-date materials on new threats, lessons from the recent financial crisis, and how businesses need to protect themselves in terms of business interruption, security, project and reputational risk management.

Project risk management is now a mature discipline with an international standard for its implementation. This book reinforces that project risk management needs to be systematic, but also that it must be embedded to become part of an organization's DNA. This book promotes techniques that will help you implement a methodical and broad approach to risk management.
- The author is a well-known expert and boasts a wealth of experience in project and enterprise risk management
- Easy-to-navigate structure breaks down the risk management process into stages to aid implementation
- Examines the external influences that bring sources of business risk that are beyond your control
- Provides a handy chapter with tips for commissioning consultants for business risk management services

It is a business imperative to have a clear vision for risk management. Simple Tools and Techniques for Enterprise Risk Management, Second Edition shows you the way.

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Weitere Infos & Material


List of Figures xxvii

Preface to the Second Edition xxxi

Acknowledgements xxxv

About the Author xxxvii

Part I Enterprise Risk Management In Context 1

1 Introduction 3

1.1 Risk Diversity 4

1.2 Approach to Risk Management 5

1.3 Business Growth Through Risk Taking 5

1.4 Risk and Opportunity 6

1.5 The Role of the Board 7

1.6 Primary Business Objective (or Goal) 8

1.7 What is Enterprise Risk Management? 9

1.8 Benefits of Enterprise Risk Management 10

1.9 Structure 12

1.9.1 Corporate Governance 12

1.9.2 Internal Control 13

1.9.3 Implementation 14

1.9.4 Risk Management Framework 14

1.9.5 Risk Management Policy 15

1.9.6 Risk Management Process 15

1.9.7 Sources of Risk 16

1.10 Summary 16

1.11 References 16

2 Developments in Corporate Governance in the UK 19

2.1 Investor Unrest 19

2.2 The Problem of Agency 20

2.3 The Cadbury Committee 21

2.4 The Greenbury Report 23

2.5 The Hampel Committee and the Combined Code of 1998 23

2.6 Smith Guidance on Audit Committees 23

2.7 Higgs 24

2.8 Tyson 24

2.9 Combined Code on Corporate Governance 2003 25

2.10 Companies Act 2006 26

2.11 Combined Code on Corporate Governance 2008 26

2.12 Sir David Walker’s Review of Corporate Governance, July 2009 (Consultation Paper) 27

2.13 Sir David Walker’s Review of Corporate Governance, November 2009 (Final Recommendation) 29

2.14 House of Commons Treasury Committee 2009 30

2.15 UK Corporate Governance Code, June 2010 32

2.16 The “Comply or Explain” Regime 34

2.17 Definition of Corporate Governance 34

2.18 Formation of Companies 35

2.19 The Financial Services Authority and Markets Act 2000 36

2.20 The London Stock Exchange 36

2.21 Summary 37

2.22 References 38

3 Developments in Corporate Governance in the US 41

3.1 Corporate Governance 41

3.2 The Securities and Exchange Commission 42

3.2.1 Creation of the SEC 42

3.2.2 Organisation of the SEC 43

3.3 The Laws That Govern the Securities Industry 44

3.3.1 Securities Act 1933 44

3.3.2 Securities Exchange Act 1934 44

3.3.3 Trust Indenture Act 1939 45

3.3.4 Investment Company Act 1940 45

3.3.5 Investment Advisers Act 1940 45

3.4 Catalysts for the Sarbanes-Oxley Act 2002 45

3.4.1 Enron 46

3.4.2 WorldCom 47

3.4.3 Tyco International 47

3.4.4 Provisions of the Act 50

3.4.5 Implementation 52

3.4.6 Sarbanes-Oxley Section 404 52

3.4.7 The Positive Effects of Post-Enron Reforms 52

3.4.8 Criticism of Section 404 Before the Global Financial Crisis 54

3.4.9 Criticism of Section 404 After the Global Financial Crisis 54

3.5 National Association of Corporate Directors 2008 55

3.6 Summary 56

3.7 References 57

4 The Global Financial Crisis of 2007–2009: A US Perspective 59

4.1 The Financial Crisis in Summary 59

4.2 How the Financial Crisis Unfolded 60

4.3 The United States Mortgage Finance Industry 61

4.4 Subprime Model of Mortgage Lending 61

4.4.1 Contributing Events to the Credit Crisis 61

4.4.2 Foreclosures 63

4.4.3 Negative Equity 65

4.4.4 Housing Surplus 67

4.4.5 Vicious Circles 68

4.5 Why this Crisis Warrants Close Scrutiny 68

4.6 Behaviours 70

4.6.1 Investor Behaviour in the Search for Yield 70

4.6.2 Mortgage Lending Behaviour 71

4.6.3 Bank Behaviour and Risk Transfer through Securitised Credit 71

4.6.4 “Group Think” and Herd Behaviour 72

4.6.5 Banks’ Behaviour and Risk Appetite 74

4.6.6 Behaviour of Regulators and the Division of “Narrow Banking” from Investment Banking 75

4.6.7 Banks’ Behaviour and Misplaced Reliance of Sophisticated Mathematics and Statistics 75

4.7 Worldwide Deficiencies in Risk Management 76

4.8 Federal Reform 76

4.9 Systemic Risk 79

4.10 The Future of Risk Management 81

4.11 Summary 82

4.12 References 82

5 Developments in Corporate Governance in Australia and Canada 85

5.1 Australian Corporate Governance 85

5.1.1 Regulation Arising from Corporate Failures 85

5.1.2 Corporate Governance Reforms Following the Accounting Scandals of the Early 2000s 86

5.1.3 Horwath 2002 Corporate Governance Report 88

5.1.4 The ASX Corporate Governance Council 89

5.1.5 Financial Statements 90

5.2 Canada 90

5.2.1 Dey Report 90

5.2.2 Dey Revisited 91

5.2.3 Kirby Report 91

5.2.4 Saucier Committee 92

5.2.5 National Policy and Instrument (April 2005) 92

5.2.6 TSE Corporate Governance: Guide to Good Disclosure 2006 93

5.3 Summary 94

5.4 References 94

6 Internal Control and Risk Management 97

6.1 The Composition of Internal Control 97

6.2 Risk as a Subset of Internal Control 98

6.2.1 The Application of Risk Management 98

6.3 Allocation of Responsibility 102

6.3.1 Cadbury Committee 102

6.3.2 Hampel Committee 102

6.3.3 Turnbull 103

6.3.4 Higgs Review 104

6.3.5 Smith Review 104

6.3.6 OECD 105

6.4 The Context of Internal Control and Risk Management 106

6.5 Internal Control and Risk Management 107

6.6 Embedding Internal Control and Risk Management 107

6.7 Summary 107

6.8 References 108

7 Developments in Risk Management in the UK Public Sector 109

7.1 Responsibility for Risk Management in Government 109

7.1.1 Cabinet Office 110

7.1.2 Treasury 111

7.1.3 Office of Government Commerce 111

7.1.4 National Audit Office 112

7.2 Risk Management Publications 112

7.3 Successful IT 113

7.4 Supporting Innovation 115

7.4.1 Part 1: Why Risk Management is Important 115

7.4.2 Part 2: Comprehension of Risk Management 115

7.4.3 Part 3: What More Needs to be Done to Improve Risk Management 115

7.5 The Orange Book 116

7.5.1 Identify the Risks and Define a Framework 116

7.5.2 Assign Ownership 116

7.5.3 Evaluate 117

7.5.4 Assess Risk Appetite 117

7.5.5 Response to Risk 117

7.5.6 Gain Assurance 118

7.5.7 Embed and Review 118

7.6 Audit Commission 118

7.7 CIPFA/SOLACE Corporate Governance 120

7.8 M_o_R 2002 121

7.9 DEFRA 123

7.9.1 Risk Management Strategy 123

7.10 Strategy Unit Report 124

7.11 Risk and Value Management 125

7.12 The Green Book 126

7.12.1 Optimism Bias 126

7.12.2 Annex 4 127

7.13 CIPFA Guidance on Internal Control 127

7.14 Managing Risks to Improve Public Services 129

7.15 The Orange Book (Revised) 131

7.16 M_o_R 2007 132

7.17 Managing Risks in Government 132

7.18 Summary 134

7.19 References 136

Part II The Risk Management Process 137

References 139

8 Establishing the Context: Stage 1 141

8.1 Process 141

8.2 Process Goal and Subgoals 142

8.3 Process Definition 143

8.4 Process Inputs 143

8.5 Process Outputs 145

8.6 Process Controls (Constraints) 145

8.7 Process Mechanisms (Enablers) 146

8.7.1 Ratios 146

8.7.2 Risk Management Process Diagnostic 147

8.7.3 SWOT Analysis 148

8.7.4 PEST Analysis 148

8.8 Process Activities 149

8.8.1 Business Objectives 149

8.8.2 Business Plan 150

8.8.3 Examining the Industry 151

8.8.4 Establishing the Processes 151

8.8.5 Projected Financial Statements 153

8.8.6 Resources 155

8.8.7 Change Management 155

8.8.8 Marketing Plan 155

8.8.9 Compliance Systems 156

8.9 Summary 156

8.10 References 156

9 Risk Identification: Stage 2 159

9.1 Process 159

9.2 Process Goal and Subgoals 159

9.3 Process Definition 160

9.4 Process Inputs 161

9.5 Process Outputs 162

9.6 Process Controls (Constraints) 162

9.7 Process Mechanisms (Enablers) 163

9.7.1 Risk Checklist 163

9.7.2 Risk Prompt List 163

9.7.3 Gap Analysis 163

9.7.4 Risk Taxonomy 164

9.7.5 PEST Prompt 165

9.7.6 SWOT Prompt 168

9.7.7 Database 168

9.7.8 Business Risk Breakdown Structure 169

9.7.9 Risk Questionnaire 169

9.7.10 Risk Register Content/Structure 170

9.8 Process Activities 171

9.8.1 Clarifying the Business Objectives 171

9.8.2 Reviewing the Business Analysis 171

9.8.3 Need for Risk and Opportunity Identification 171

9.8.4 Risk and Opportunity Identification 172

9.8.5 Facilitation 172

9.8.6 Gaining a Consensus on the Risks, the Opportunities and

their Interdependencies 182

9.8.7 Risk Register 182

9.9 Summary 182

9.10 References 182

10 Risk Analysis: Stage 3 185

10.1 Process 185

10.2 Process Goal and Subgoals 186

10.3 Process Definition 186

10.4 Process Inputs 186

10.5 Process Outputs 188

10.6 Process Controls (Constraints) 188

10.7 Process Mechanisms (Enablers) 188

10.7.1 Probability 188

10.8 Process Activities 189

10.8.1 Causal Analysis 190

10.8.2 Decision Analysis and Influence Diagrams 190

10.8.3 Pareto Analysis 193

10.8.4 CAPM Analysis 194

10.8.5 Define Risk Evaluation Categories and Values 195

10.9 Summary 195

10.10 References 196

11 Risk Evaluation: Stage 4 197

11.1 Process 197

11.2 Process Goal and Subgoals 197

11.3 Process Definition 198

11.4 Process Inputs 198

11.5 Process Outputs 198

11.6 Process Controls (Constraints) 199

11.7 Process Mechanisms (Enablers) 200

11.7.1 Probability Trees 200

11.7.2 Expected Monetary Value 201

11.7.3 Utility Theory and Functions 203

11.7.4 Decision Trees 204

11.7.5 Markov Chain 208

11.7.6 Investment Appraisal 210

11.8 Process Activities 215

11.8.1 Basic Concepts of Probability 215

11.8.2 Sensitivity Analysis 216

11.8.3 Scenario Analysis 217

11.8.4 Simulation 217

11.8.5 Monte Carlo Simulation 218

11.8.6 Latin Hypercube 220

11.8.7 Probability Distributions Defined from Expert Opinion 220

11.9 Summary 221

11.10 References 222

12 Risk Treatment: Stage 5 223

12.1 Process 223

12.2 Process Goal and Subgoals 223

12.3 Process Definition 224

12.4 Process Inputs 224

12.5 Process Outputs 224

12.6 Process Controls (Constraints) 225

12.7 Process Mechanisms 225

12.8 Process Activities 226

12.9 Risk Appetite 226

12.10 Risk Response Strategies 228

12.10.1 Risk Reduction 228

12.10.2 Risk Removal 228

12.10.3 Risk Reassignment or Transfer 229

12.10.4 Risk Retention 230

12.11 Summary 230

12.12 References 231

13 Monitoring and Review: Stage 6 233

13.1 Process 233

13.2 Process Goal and Subgoals 234

13.3 Process Definition 234

13.4 Process Inputs 235

13.5 Process Outputs 235

13.6 Process Controls (Constraints) 235

13.7 Process Mechanisms 236

13.8 Process Activities 236

13.8.1 Executing 236

13.8.2 Monitoring 236

13.8.3 Controlling 237

13.9 Summary 239

13.10 Reference 240

14 Communication and Consultation: Stage 7 241

14.1 Process 241

14.2 Process Goal and Subgoals 242

14.3 Process Definition 242

14.4 Process Inputs 243

14.5 Process Outputs 243

14.6 Process Controls (Constraints) 244

14.7 Process Mechanisms 244

14.8 Process Activities 244

14.9 Internal Communication 245

14.10 External Communication 245

14.11 Summary 245

14.12 Reference 246

Part III Internal Influences – Micro Factors 247

15 Financial Risk Management 249

15.1 Definition of Financial Risk 249

15.2 Scope of Financial Risk 250

15.3 Benefits of Financial Risk Management 250

15.4 Implementation of Financial Risk Management 251

15.5 Liquidity Risk 251

15.5.1 Current and Quick Ratios 251

15.5.2 Mitigation of Liquidity Risk 253

15.6 Credit Risk 253

15.6.1 Default Risk 253

15.6.2 Exposure Risk 254

15.6.3 Recovery Risk 254

15.6.4 Credit Insurance 255

15.6.5 Counterparty Risk 256

15.6.6 Due Diligence 256

15.7 Borrowing 259

15.8 Currency Risk 259

15.9 Funding Risk 260

15.10 Foreign Investment Risk 262

15.10.1 Country Risk 262

15.10.2 Environment Risk 263

15.11 Derivatives 263

15.11.1 Exchange Traded Derivatives 263

15.11.2 Over-the-Counter Derivatives 264

15.12 Summary 264

15.13 References 265

16 Operational Risk Management 267

16.1 Definition of Operational Risk 268

16.2 Scope of Operational Risk 269

16.3 Benefits of Operational Risk 270

16.4 Implementation of Operational Risk 270

16.5 Strategy 270

16.5.1 Definition of Strategy Risk 270

16.5.2 Objectives 271

16.5.3 Business Plan 272

16.5.4 New Business Development 272

16.5.5 Resources 273

16.5.6 Stakeholder Interests 273

16.5.7 Corporate Experience 274

16.5.8 Reputation 274

16.6 People 275

16.6.1 Definition of People Risk 275

16.6.2 Types of People Risk 276

16.6.3 Human Resource Management Practices 276

16.6.4 Ability to Pay Salaries 277

16.6.5 Regulatory and Statutory Requirements 277

16.6.6 Staff Constraints 280

16.6.7 Staff Dishonesty 287

16.6.8 Risk Management 287

16.6.9 Health and Safety 292

16.7 Processes and Systems 292

16.7.1 Definition of Processes and Systems Risk 293

16.7.2 Controls 293

16.7.3 Regulatory and Statutory Requirements 294

16.7.4 Continuity 294

16.7.5 Indicators of Loss 295

16.7.6 Transactions 295

16.7.7 Computer/IT Systems 297

16.7.8 Knowledge Management 301

16.7.9 Project Management 302

16.8 External Events 303

16.8.1 Change Management 303

16.8.2 Business Continuity 304

16.9 Outsourcing 305

16.10 Measurement 307

16.11 Mitigation 307

16.12 Summary 307

16.13 References 308

17 Technological Risk Management 309

17.1 Definition of Technology Risk 310

17.2 Scope of Technology Risk 310

17.3 Benefits of Technology Risk Management 311

17.4 Implementation of Technology Risk Management 311

17.5 Primary Technology Types 312

17.5.1 Information Technology 312

17.5.2 Communications Technology 315

17.5.3 Control Technology 319

17.6 Responding to Technology Risk 324

17.6.1 IT Governance 324

17.6.2 Investment 326

17.6.3 Projects 329

17.7 Summary 330

17.8 References 331

18 Project Risk Management 333

18.1 Definition of Project Risk 334

18.2 Definition of Project Risk Management 334

18.3 Sources of Project Risk 335

18.4 Benefits of Project Risk Management 335

18.5 Embedding Project Risk Management 336

18.5.1 Common Challenges in Implementing Project Risk Management 336

18.5.2 Lack of Clearly Defined and Disseminated Risk Management Objectives 337

18.5.3 Lack of Senior Executive and Project Director Commitment and Support 337

18.5.4 Lack of a Risk Maturity Model 337

18.5.5 Lack of a Change Process to Implement the Discipline 338

18.5.6 No Common Risk Language (Terms and Definitions) 338

18.5.7 Lack of Articulation of the Project Sponsor’s Risk Appetite 338

18.5.8 No Definition of Roles and Responsibilities 339

18.5.9 Lack of Risk Management Awareness Training to Build Core Competencies 339

18.5.10 Lack of Integration of Risk Management with Other Project Disciplines 340

18.5.11 Reticence of Project Personnel to Spend Time on Risk Management 340

18.5.12 Risk Owners not Automatically Taking Responsibility for Assigned Risks 341

18.5.13 No Clear Demonstration of How Risk Management Adds Value and Contributes to Project Performance 341

18.5.14 Overcomplicated Implementation from an Unclear Risk Policy, Strategy, Framework, Plan and Procedure 341

18.5.15 Lack of Alignment between the Business Strategy, Business Model and the Risk Management Objectives 341

18.5.16 Lack of the Integration of Risk Management Activities into the Day-to-Day Activities of Project Managers 342

18.6 Project Risk Management Process 342

18.6.1 Establish the Context 342

18.6.2 Risk Identification 344

18.6.3 Risk Analysis 344

18.6.4 Risk Evaluation 345

18.6.5 Risk Treatment 345

18.6.6 Risk Monitoring and Review 345

18.6.7 Communication and Consultation 346

18.7 Responsibility for Project Risk Management 346

18.8 Project Director’s Role 347

18.9 Project Team 347

18.9.1 Lack of Team Structure 347

18.9.2 Lack of Definition of Roles 348

18.9.3 Lack of Responsibility Assignment Matrix 348

18.9.4 Poor Leadership 348

18.9.5 Poor Team Communication 348

18.10 Optimism Bias 349

18.10.1 The Investment Decision 349

18.10.2 Optimism Bias 350

18.10.3 Monitoring 350

18.10.4 Using Numerical Indicators in Project Decision Making 350

18.10.5 Causes of Optimism Bias 351

18.10.6 The Distinction between Risk Events and Optimism Bias 351

18.11 Software Tools Used to Support Project Risk Management 351

18.12 Techniques Used to Support Project Risk Management 352

18.13 Summary 352

18.14 References 354

19 Business Ethics Management 355

19.1 Definition of Business Ethics Risk 355

19.2 Scope of Business Ethics Risk 356

19.3 Benefits of Ethics Risk Management 357

19.4 How Unethical Behaviour can Arise 357

19.5 Recognition of the Need for Business Ethics 358

19.5.1 US Department of Commerce 358

19.5.2 The G8 Summit in Italy Pushes for a Return to “Ethics” 359

19.5.3 OECD and Its Approach to Business Ethics 359

19.5.4 UK Financial Services Authority 360

19.5.5 US Department of Justice 360

19.6 Factors that Affect Business Ethics 361

19.7 Risk Events 361

19.8 Implementation of Ethical Risk Management 365

19.8.1 Areas of Focus 365

19.8.2 Levels of Application 366

19.8.3 The System 368

19.9 Summary 374

19.10 References 374

20 Health and Safety Management 375

20.1 Definition of Health and Safety Risk 375

20.2 Scope of Health and Safety Risk 376

20.3 Benefits of Health and Safety Risk Management 376

20.3.1 Business Benefits 377

20.3.2 The Enterprise Context: AstraZeneca 378

20.4 The UK Health and Safety Executive 378

20.4.1 The UK Perspective: Health and Safety Record 379

20.5 The European Agency for Safety and Health at Work 379

20.5.1 Main Challenges Concerning Health and Safety at Work 380

20.6 Implementation of Health and Safety Risk Management 380

20.6.1 Management Arrangements 381

20.6.2 Risk Controls 381

20.6.3 Workplace Precautions 381

20.6.4 System Implementation 382

20.7 Workplace Precautions 382

20.8 Contribution of Human Error to Major Disasters 382

20.8.1 Tenerife, 27 March 1977 382

20.8.2 Chernobyl, 26 April 1986 384

20.8.3 Kegworth, 8 January 1989 385

20.8.4 Herald of Free Enterprise, 6 March 1987 386

20.8.5 Piper Alpha, 6 July 1988 387

20.8.6 Ladbroke Grove, 5 October 1999 387

20.9 Improving Human Reliability in the Workplace 388

20.10 Risk Management Best Practice 389

20.10.1 Crisis Management Plan 389

20.11 Summary 390

20.12 References 390

Part Iv External Influences – Macro Factors 391

21 Economic Risk 393

21.1 Definition of Economic Risk 393

21.2 Scope of Economic Risk 393

21.3 Benefits of Economic Risk Management 394

21.4 Implementation of Economic Risk Management 394

21.5 Microeconomics and Macroeconomics 394

21.6 Macroeconomics 395

21.6.1 Gross Domestic Product 395

21.7 Government Policy 397

21.7.1 Fiscal Policy 397

21.7.2 Monetary Policy 397

21.7.3 Competing Theories 398

21.8 Aggregate Demand 398

21.8.1 Using Aggregate Demand Curves 399

21.8.2 Determinants of Consumer Spending 399

21.8.3 Determinants of Investment Expenditure 400

21.8.4 Determinants of Government Spending 400

21.8.5 Determinants of Net Expenditure on Exports and Imports 401

21.9 Aggregate Supply 401

21.10 Employment Levels 403

21.11 Inflation 403

21.12 Interest Rate Risk 404

21.13 House Prices 405

21.14 International Trade and Protection 405

21.14.1 Trade 405

21.14.2 Methods of Protectionism 406

21.14.3 Trade Policy 406

21.14.4 Balance of Trade 406

21.15 Currency Risk 407

21.15.1 Risk Mitigation by Hedging 407

21.16 Summary 412

21.17 References 412

22 Environmental Risk 413

22.1 Definition of Environmental Risk 413

22.2 Scope of Environmental Risk 415

22.3 Benefits of Environmental Risk Management 415

22.4 Implementation of Environmental

Risk Management 415

22.5 Energy Sources 416

22.5.1 Renewable Energy 417

22.6 Use of Resources 419

22.7 Pollution 420

22.8 Global Warming 420

22.9 Response to Global Warming 422

22.9.1 Earth Summit 422

22.9.2 The Kyoto Protocol 422

22.9.3 Pollution Control Targets 422

22.9.4 Sufficiency of Emission Cuts 423

22.9.5 US Climate Pact 423

22.9.6 The Copenhagen Accord 424

22.9.7 European Union 425

22.9.8 Cancún Agreements 425

22.9.9 Domestic Government Response to Climate Change 426

22.9.10 Levy 427

22.9.11 Emissions Trading 428

22.9.12 Impact on Business 428

22.10 Stimulation to Environmental Considerations 429

22.10.1 FTSE4Good Index 429

22.10.2 Carbon Trust 429

22.10.3 Public Pressure 430

22.11 Environmental Sustainability 431

22.12 Summary 432

22.13 References 433

23 Legal Risk 435

23.1 Definition of Legal Risk 435

23.2 Scope of Legal Risk 435

23.3 Benefits of Legal Risk Management 436

23.4 Implementation of Legal Risk Management 436

23.5 Business Law 437

23.6 Companies 438

23.6.1 The Company Name 438

23.6.2 The Memorandum of Association 438

23.6.3 Articles of Association 439

23.6.4 Financing the Company 439

23.6.5 The Issue of Shares and Debentures 440

23.6.6 The Official Listing of Securities 440

23.6.7 The Remedy of Rescission 440

23.6.8 Protection of Minority Interests 440

23.6.9 Duties of Directors 441

23.7 Intellectual Property 441

23.7.1 Patents 441

23.7.2 Copyright 445

23.7.3 Designs 446

23.8 Employment Law 447

23.9 Contracts 447

23.9.1 Essentials of a Valid Contract 447

23.9.2 Types of Contract 447

23.10 Criminal Liability in Business 448

23.10.1 Misdescriptions of Goods and Services 448

23.10.2 Misleading Price Indications 449

23.10.3 Product Safety 450

23.11 Computer Misuse 451

23.11.1 Unauthorised Access to Computer Material 451

23.11.2 Unauthorised Access with Intent to Commit or Facilitate

Further Offences 451

23.11.3 Unauthorised Modification of Computer Material 451

23.12 Summary 452

24 Political Risk 453

24.1 Definition of Political Risk 454

24.2 Scope of Political Risk 454

24.2.1 Macropolitical Risks 454

24.2.2 Micropolitical Risks 455

24.3 Benefits of Political Risk Management 455

24.4 Implementation of Political Risk Management 455

24.5 Zonis and Wilkin Political Risk Framework 457

24.6 Contracts 459

24.7 Transition Economies of Europe 459

24.8 UK Government Fiscal Policy 460

24.9 Pressure Groups 461

24.10 Terrorism and Blackmail 461

24.11 Responding to Political Risk 462

24.11.1 Assessing Political Risk Factors 463

24.11.2 Prioritising Political Risk Factors 464

24.11.3 Improving Relative Bargaining Power 464

24.12 Summary 464

24.13 References 465

25 Market Risk 467

25.1 Definition of Market Risk 467

25.2 Scope of Market Risk 468

25.2.1 Levels of Uncertainty in the Marketing Environment 469

25.3 Benefits of Market Risk Management 470

25.4 Implementation of Market Risk Management 470

25.5 Market Structure 470

25.5.1 The Number of Firms in an Industry 471

25.5.2 Barriers to Entry 471

25.5.3 Product Homogeneity, Product Diversity and Branding 473

25.5.4 Knowledge 473

25.5.5 Interrelationships within Markets 474

25.6 Product Life Cycle Stage 475

25.6.1 Sales Growth 476

25.7 Alternative Strategic Directions 476

25.7.1 Market Penetration 477

25.7.2 Product Development 477

25.7.3 Market Development 479

25.7.4 Diversification 481

25.8 Acquisition 482

25.9 Competition 483

25.9.1 Price Stability 483

25.9.2 Non-Price Competition 484

25.9.3 Branding 485

25.9.4 Market Strategies 486

25.10 Price Elasticity/Sensitivity 489

25.10.1 Elasticity 489

25.10.2 Price Elasticity 489

25.11 Distribution Strength 490

25.12 Market Risk Measurement: Value at Risk 490

25.12.1 Definition of Value at Risk 490

25.12.2 Value at Risk 490

25.12.3 VaR Model Assumptions 491

25.12.4 Use of VaR to Limit Risk 493

25.12.5 Calculating Value at Risk 494

25.13 Risk Response Planning 496

25.14 Summary 496

25.15 References 497

26 Social Risk 499

26.1 Definition of Social Risk 499

26.2 Scope of Social Risk 500

26.3 Benefits of Social Risk Management 500

26.4 Implementation of Social Risk Management 501

26.5 Education 501

26.6 Population Movements: Demographic Changes 502

26.6.1 The Changing Market 503

26.7 Socio-Cultural Patterns and Trends 504

26.8 Crime 504

26.8.1 Key Facts 504

26.9 Lifestyles and Social Attitudes 505

26.9.1 More Home Improvements 505

26.9.2 Motherhood, Marriage and Family Formation 505

26.9.3 Health 506

26.9.4 Less Healthy Diets 507

26.9.5 Smoking and Drinking 508

26.9.6 Long Working Hours 509

26.9.7 Stress Levels 509

26.9.8 Recreation and Tourism 510

26.10 Summary 510

26.11 References 511

Part V The Appointment 513

27 Introduction 515

27.1 Change Process From the Client Perspective 515

27.1.1 Planning 515

27.1.2 Timely Information 516

27.1.3 Risk Management Resources 516

27.2 Selection of Consultants 517

27.2.1 Objectives 517

27.2.2 The Brief 517

27.2.3 Describing Activity Interfaces 517

27.2.4 Appointment Process Management 518

27.2.5 The Long-Listing Process 518

27.2.6 Short-List Selection Criteria 519

27.2.7 Request for a Short-Listing Interview 519

27.2.8 Compilation of Short List 519

27.2.9 Prepare an Exclusion Notification 520

27.2.10 Prepare Tender Documents 520

27.2.11 Agreement to be Issued with the Tender Invitation 521

27.2.12 Tender Process 521

27.2.13 Award 521

27.2.14 Notification to Unsuccessful Tenderers 522

27.3 Summary 522

27.4 Reference 522

28 Interview with the Client 523

28.1 First Impressions/Contact 523

28.2 Client Focus 524

28.3 Unique Selling Point 524

28.4 Past Experiences 526

28.5 Client Interview 527

28.5.1 Scene/Overview 527

28.5.2 Situation/Context 527

28.5.3 Scheme/Plan of Action 527

28.5.4 Solution Implementation 528

28.5.5 Success, Measurement of 528

28.5.6 Secure/Continue 528

28.5.7 Stop/Close 528

28.6 Assignment Methodology 528

28.7 Change Management 529

28.8 Sustainable Change 529

28.9 Summary 530

28.10 References 531

29 Proposal 533

29.1 Introduction 533

29.2 Proposal Preparation 533

29.2.1 Planning 533

29.2.2 Preliminary Review 534

29.3 Proposal Writing 534

29.3.1 Task Management 534

29.3.2 Copying Text 534

29.3.3 Master Copy 534

29.3.4 Peer Review 534

29.4 Approach 535

29.5 Proposal 535

29.5.1 Identify the Parties – the Who 535

29.5.2 Identify the Location – the Where 537

29.5.3 Understand the Project Background – the What 537

29.5.4 Define the Scope – the Which 537

29.5.5 Clarify the Objectives – the Why 537

29.5.6 Determine the Approach – the How 538

29.5.7 Determine the Timing – the When 538

29.6 Client Responsibilities 538

29.7 Remuneration 539

29.8 Summary 539

29.9 References 539

30 Implementation 541

30.1 Written Statement of Project Implementation 541

30.2 Management 541

30.2.1 Objectives 541

30.2.2 Planning the Project 542

30.2.3 Consultant Team Composition 543

30.2.4 Interface with Stakeholders 543

30.2.5 Data Gathering 543

30.2.6 Budget 544

30.2.7 Assessment of Risk 544

30.2.8 Deliverables 544

30.2.9 Presentation of the Findings 545

30.2.10 Key Factors for Successful Implementation 545

30.3 Customer Delight 548

30.4 Summary 548

30.5 References 548

Appendix 1: Successful IT: Modernising Government in Action 549

Appendix 2: Sources of Risk 553

Appendix 3: DEFRA Risk Management Strategy 557

Appendix 4: Risk: Improving Government’s Capability to Handle Risk and Uncertainty 561

Appendix 5: Financial Ratios 567

Appendix 6: Risk Maturity Models 573

Appendix 7: SWOT Analysis 579

Appendix 8: PEST Analysis 583

Appendix 9: VRIO Analysis 587

Appendix 10: Value Chain Analysis 589

Appendix 11: Resource Audit 591

Appendix 12: Change Management 595

Appendix 13: Industry Breakpoints 599

Appendix 14: Probability 601

Appendix 15: Value at Risk 611

Appendix 16: Optimism Bias 613

Index 621


About the author

ROBERT J. CHAPMAN is the Director of Risk Management in the Middle East for AECOM, a publicly traded company on the New York Stock Exchange, and listed on the Fortune 500 as one of America's largest companies. Prior to this he held the position of Director of Risk Management at a number of European companies and has provided risk management consultancy services in Holland, Ireland, South Africa, Qatar, England and the UAE to companies within the pharmaceutical, aviation, marine, rail, broadcast, heritage, health, education, manufacturing, water, sport, oil and gas, property development, construction and media sectors. He was made a Fellow of both the Institute of Risk Management (UK) and the Association for Project Management (UK) for his contribution to the development of the discipline of risk management. He has provided guidance to the Chartered Institute of Accountants in England and Wales in the form of a risk management handbook and was a co-author of Management of Risk: Guidance for Practitioners published by the Office of Government Commerce and Managing Business Risk published by Kogan Page. He has had articles on the subject of risk management published in three languages and has a PhD in risk management.



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