Implementing Enterprise Risk Management: Case Studies and Best Practices

PRAISE FOR IMPLEMENTING ENTERPRISE RISK MANAGEMENT "This book should be an extremely valuable source of knowledge for anyone interested in the emerging and evolving field of risk management." —Robert S. Kaplan, Senior Fellow, Marvin Bower Professor of Leadership Development, Emeritus, Harvard University "It will provide a much needed resource to students and practitioners for many years to come and should become a well used reference on the desk of every manager of risk." —Kevin W. Knight, AM, Chairman, ISO/TC 262 Risk Management "I commend the editors and contributors for making a significant contribution to ERM by sharing their experiences." —James Lam, President, James Lam & Associates; Director and Risk Oversight Committee Chairman, E*TRADE Financial Corporation; author of Enterprise Risk Management: From Incentives to Controls "The broad collection of practices is insightful for students, academics, and executives, as well as seasoned risk management professionals." —Carol Fox, ARM, Director of Strategic & Enterprise Risk Practice, RIMS "I highly recommend this book for use by executives, line managers, risk managers, and business students alike." —Douglas F. Prawitt, Professor of Accounting at Brigham Young University, and Committee of Sponsoring Organizations (COSO) Executive Board member " Implementing Enterprise Risk Management looks at many industries through excellent case studies, providing a real-world base for its recommendations and an important reminder that ERM is valuable in many industries. I highly recommend this text." —Russell Walker, Clinical Associate Professor, Kellogg School of Management; author of Winning with Risk Management

Foreword xiii 1 Enterprise Risk Management Case Studies: An Introduction and Overview 1 John R.S. Fraser, Betty J. Simkins, and Kristina Narvaez PART I Overview and Insights for Teaching ERM 17 2 An Innovative Method to Teaching Enterprise Risk Management: A Learner–Centered Teaching Approach 19 David R. Lange and Betty J. Simkins PART II ERM Implementation at Leading Organizations 37 3 ERM at Mars, Incorporated: ERM for Strategy and Operations 39 Larry Warner 4 Value and Risk: Enterprise Risk Management at Statoil 59 Alf Alviniussen and H¢ªakan Jankensgård 5 ERM in Practice at the University of California Health System 75 Grace Crickette 6 Strategic Risk Management at the LEGO Group: Integrating Strategy and Risk Management 93 Mark L. Frigo and Hans Læssøe 7 Turning the Organizational Pyramid Upside Down: Ten Years of Evolution in Enterprise Risk Management at United Grain Growers 107 John Bugalla 8 Housing Association Case Study of ERM in a Changing Marketplace 119 John Hargreaves 9 Lessons from the Academy: ERM Implementation in the University Setting 143 Anne E. Lundquist 10 Developing Accountability in Risk Management: The British Columbia Lottery Corporation Case Study 179 Jacquetta C. M. Goy 11 Starting from Scratch: The Evolution of ERM at the Workers’ Compensation Fund 207 Dan M. Hair 12 Measuring Performance at Intuit: A Value–Added Component in ERM Programs 227 Janet Nasburg 13 TD Bank’s Approach to an Enterprise Risk Management Program 241 Paul Cunha and Kristina Narvaez PART III Linking ERM to Strategy and Strategic Risk Management 251 14 A Strategic Approach to Enterprise Risk Management at Zurich Insurance Group 253 Linda Conrad and Kristina Narvaez 15 Embedding ERM into Strategic Planning at the City of Edmonton 281 Ken Baker 16 Leveraging ERM to Practice Strategic Risk Management 305 John Bugalla and James Kallman PART IV Specialized Aspects of Risk Management 319 17 Developing a Strategic Risk Plan for the Hope City Police Service 321 Andrew Graham 18 BlueWood Chocolates 335 Stephen McPhie and Rick Nason 19 Kilgore Custom Milling 363 Rick Nason and Stephen McPhie 20 Implementing Risk Management within Middle Eastern Oil and Gas Companies 377 Alexander Larsen 21 The Role of Root Cause Analysis in Public Safety ERM Programs 397 Andrew Bent 22 JAA Inc.—A Case Study in Creating Value from Uncertainty: Best Practices in Managing Risk 427 Julian du Plessis, Arnold Schanfield, and Alpaslan Menevse 23 Control Complacency: Rogue Trading at Société Générale 461 Steve Lindo 24 The Role of VaR in Enterprise Risk Management: Calculating Value at Risk for Portfolios Held by the Vane Mallory Investment Bank 489 Allissa A. Lee and Betty J. Simkins 25 Uses of Efficient Frontier Analysis in Strategic Risk Management: A Technical Examination 501 Ward Ching and Loren Nickel PART V Mini–Cases on ERM and Risk 523 26 Bim Consultants Inc. 525 John R.S. Fraser 27 Nerds Galore 529 Rob Quail 28 The Reluctant General Counsel 535 Norman D. Marks 29 Transforming Risk Management at Akawini Copper 539 Grant Purdy 30 Alleged Corruption at Chessfield: Corporate Governance and the Risk Oversight Role of the Board of Directors 547 Richard Leblanc 31 Operational Risk Management Case Study: Bon Boulangerie 555 Diana Del Bel Belluz PART VI Other Case Studies 559 32 Constructive Dialogue and ERM: Lessons from the Financial Crisis 561 Thomas H. Stanton 33 Challenges and Obstacles of ERM Implementation in Poland 577 Zbigniew Krysiak and S .lawomir Pijanowski 34 Turning Crisis into Opportunity: Building an ERM Program at General Motors 607 Marc S. Robinson, Lisa M. Smith, and Brian D. Thelen 35 ERM at Malaysia’s Media Company Astro: Quickly Implementing ERM and Using It to Assess the Risk–Adjusted Performance of a Portfolio of Acquired Foreign Companies 623 Patrick Adam K. Abdullah and Ghislain Giroux Dufort About the Editors 649 Index 651

JOHN R.S. FRASER is the Senior Vice President of Internal Audit and former Chief Risk Officer of Hydro One Networks Inc. He holds several auditing and accounting certifications and has over 30 years of experience in the risk and control field. BETTY J. SIMKINS is the Williams Chair and Professor of Finance at Oklahoma State University's Spears School of Business, where she teaches enterprise risk management and other courses. She has published award-winning research on risk management in academic and professional outlets. KRISTINA NARVAEZ is President and CEO of ERM Strategies. Her work in risk management has been recognized with accolades and awards from numerous organizations, including the Risk and Insurance Management Society.