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
FREDERICK FUNSTON is a principal with Deloitte & Touche LLP and has more than thirty years of experience working with leaders of numerous global companies. In 2000, Rick created the concept of risk intelligence for value creation and value protection. He is a frequent speaker and writer on leveraging risk intelligence for competitive advantage in complex, global organizations. STEPHEN WAGNER is a nationally recognized thought leader on corporate governance. In 2009, Steve retired as the managing partner of Deloitte LLP's Center for Corporate Governance, where he led the firm's integrated strategy for governance services. He is a frequent speaker at governance conferences and directors' colleges and has authored or contributed to numerous articles on governance and risk.
"The authors propose a more holistic approach of "risk intelligence," in which leaders acknowledge and prepare for a wide range of potential threats. The authors isolate ten essential risk intelligence skills-such as abandoning familiar assumptions, anticipating causes of failure, and sustaining operational discipline-and provide in-depth guidelines for how executives and board members can hone these skills. They understand that there is no reward without risk - but only if the risks are properly managed." (BizEd, July/August 2010)