Mastering Strategic Risk: A Framework for Leading and Transforming Organizations

Praise for Mastering Strategic Risk Mastering Strategic Risk is full of simple principles combined brilliantly by Joel McPhee to help you guide your business through the ongoing whitewater of todays corporate world. Read this book, apply its concepts, and youll find yourself leading at a higher level. Ken Blanchard, co–author of The One Minute Manager and Leading at a Higher Level Joels book is a delight to read. He draws upon his extensive background as a Chief Risk Officer, using his highly accessible style and examples from several industries to develop extremely sound and powerful lessons that should be compulsory reading matter for everyone working in business today, not just risk managers. Coupled with a recognition of the natural ebb and flow of natureand of businessand mastery of effective change management, this provides a true recipe for long–term strategic success. Steve Fowler, Strategic Advisor to the Board and Former CEO, The Institute of Risk Management, London, UK; President, Amarreurs Consulting Ltd, London, UK In todays business world, the pace of change is ever increasing. The winners are likely to be those who not only embrace change, but those who have the risk management infrastructure that enables them to change quickly and minimize adverse outcomes. In Mastering Strategic Risk , Joel McPhee applies his extensive hands–on experience to give you a framework for controlling risk and moving quickly in a business environment that continually demands more speed and better outcomes. Bryan Jordan, Chairman, President and CEO, First Horizon National Corporation Revolutionary thinking doesnt come around every day. Mastering Strategic Risk is an elegant book, packed with simple truths that can help us allorganizations and the people who inhabit themreach our true potential. The world of our future can be reached today by following McPhees steady guidance. Alison Woo, Director, Social Media, Bristol–Myers Squibb

Preface xiii Acknowledgments xv INTRODUCTION Mastering the Complexities of a New Age 1 CHAPTER 1 The Round World, the Square Pegs: Redesigning Organizations to Manage the Risks of a Different World 5 Righting the Ship: Managing the Complexities of a New Age 5 The Untold Story of Wachovia’s Demise: The Rise and Fall of an Industry Giant 7 A Symptom of a Much Larger Challenge 12 The Burning Platform: Why the Need for Change 14 Leveraging the Power of People 15 A World of Patterns: Does Nature Hold the Answers? 16 References 17 CHAPTER 2 The Three Elements: Creating, Facilitating, and Supporting Your Competitive Advantage 19 A Framework Taken from Nature 19 The Human Body as an Example 22 Ecosystems 25 The Three Elements and Our Marketplace 26 The Three Elements and the Auto Industry 31 The Three Elements and Organizations 32 The Creative Element in Organizations 34 Information Technology as an Example 36 Everything Old Is New Again 36 Summary 38 Questions 38 Note 39 References 39 CHAPTER 3 The Three Forces: Mastering Strategic Risk with Repetition, Balance, and Movement 41 Anticipating Change: Toyota 41 Three Forces that Dictate Performance in Systems 43 Movement and Change in Nature 44 Movement, Balance, and Repetition in Our Marketplace 48 Change, Balance, and Repetition in Organizations 51 The Three Elements and Forces and Our System of Government 54 The Federal Government Supports, Facilitates, and Creates: A Fractal View 57 The Federal Government and Oversight 58 A Holistic Approach 59 Summary 60 Questions 60 References 61 CHAPTER 4 Transforming the Corporate Agenda: Applying the New Learning to Master Strategic Risk 63 Aligning the Three Elements and Forces for Impactful Results 63 The Three Elements as Key Drivers of Organizational Performance 65 Creativity and Innovation through the Lens of Industry Leaders 67 Identifying Additional Centers of Creativity and Growth in the Most Unlikely of Places 71 Growth through Facilitative Functions and Capabilities 74 Growth through Supportive Functions and Capabilities 76 Repetition and Operational Excellence 78 Wachovia and Merger Integration 78 Managing Movement and Change 81 The Value of a Transformation and Change COE 81 The Importance of Measuring Key Controls and Activities 83 Assessing Key Drivers through the Universal Guide 85 Summary 88 Questions 89 References 89 CHAPTER 5 Risky Business: Why the Environment Should Matter to You 91 Our Self–Centered Interests 91 The Truth about Systems 94 Our Commercial Ecosystem 94 Driving Growth and Shareholder Value through Sustainability 98 Demystifying the Myth . . . What Really Is a Corporation? 100 A Lesson on the Environment and Sustainability 101 Other Factors Driving Commerce 104 Improving Our Interaction with the Planet 105 Making the Case for the Environment 110 The Corporation and the Community 110 The Realities of Life Downstream 111 In the End, It’s About the Individual 112 Summary 113 Questions 114 References 114 CHAPTER 6 Governance, the Cornerstone of Risk: The True Role of Accountability in Organizational Systems 115 Governance in Natural Systems: The Human Brain as an Example 115 WorldCom and the Bernie Ebbers Story 117 Strategy and Governance 120 Complacency and Governance 123 The Role of Accountability in Systems 123 Accountability at Adulant Technologies 124 The Importance of Roles and Responsibilities 125 A Crisis of Corporate Culture: The Story of News Corp. 127 The Independent Board of Directors 130 Summary 132 Questions 133 Notes 133 CHAPTER 7 The Game Changer: Stewardship—Taming the Land Grabbers, Passive Aggressors, and the Mighty Ogre 135 The Coup d’État 135 It’s Time for Change 137 A Profi le in Leadership 144 Summary 151 Questions 152 References 152 CHAPTER 8 The Risks of Human Capital: Unleashing the Conceivers, Deal Makers, and Sustainers 153 A New Human Resources Model 153 The Internet Example 164 A New Model for Evaluating Teams 165 The Diversity Trap 169 The Three Forces and the New HR Model 170 Summary 173 Questions 174 CHAPTER 9 Waking Sleeping Giants: The Importance of Empowering Employees 175 The Empowered Employee: The Key to Driving Peak Performance 175 Citrix Systems Inc.: Cultivating a Culture of Empowerment 178 Adapting to a Mobile Workforce 180 Employee Engagement and Its Linkage to Empowerment 181 A Professional Development Journey 183 Reinvention and the Individual 185 The Learning Organization’s Connection to Movement and Change 186 The Importance of Infusing New Blood into Your Organization 189 Employees Driving Shareholder Value 190 Tapping Employee Resources to Enhance Value 191 Do They Have a Dog in the Fight? Engagement through Creating a Compelling Vision 192 Seizing the Opportunity at Hand: A Message to Employees 196 Summary 198 Questions 199 References 199 CHAPTER 10 The Shining Moment: Unlocking the Potential and Promise of the Twenty–First Century 201 Henry Ford: Riding the Wave of Converging Forces 201 Our World Then and Our World Now 203 The Call for Transformation 204 Mastering Change Matters More Now than Ever Before 205 Enhanced Capabilities Driving Change 207 Human Beings: Our Greatest Natural Resource 208 Man’s Coming of Age 210 What Will Be Our Lasting Legacy? 213 The Way of the World: Revisiting the Core Elements and Forces 215 The Emerging Steward: Why Organizations Must Lead from the Edge 217 The Masters of Our Fate 218 Summary 220 References 221 About the Author 223 About the Companion Web Site 225 Index 227

JOEL E. M C PHEE, J R ., is a business strategist, former executive, and a keen student of understanding how organizations as systems work. Through a holistic and integrated approach, he provides consulting services to top Fortune 500 companies. A former Senior Leader at Wells Fargo, Inc., Joel was the Chief Risk Officer for the companys 18,000–member Operations and Technology division, and headed its Global Delivery Center. During his more than 20 years of experience he has held critical roles at other top financial institutions, placing him at the forefront of addressing some of the most formidable challenges facing this industry. He brings his rich background and fresh insights to each client. Joel and his team provide strategic consulting services in the areas of Strategy, Risk, and Change Management. Joel, who is also an attorney, co–authored the article Why Government Regulators Need Corporate Boot Camp for The Washington Post . He is a sought–after industry expert and speaker and is quoted regularly in industry articles. Most recently his thoughts on off–shore banking practices were published in Bank Technology News in the article A Reversal of Fortune. Learn more at : www.JoelMcPhee.com