How to 'Get Smart' About Risk Management is the Focus of Deloitte's New Book, 'Surviving and Thriving in Uncertainty: Creating the Risk Intelligent Enterprise'

Breakthrough Deloitte book identifies 10 fatal flaws of conventional risk management, describes 10 critical business skills to overcome these flaws. Book helps companies make better, 'Risk Intelligent' business decisions.

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Deloitte

Apr 12, 2010, 09:52 ET

NEW YORK, April 12 /PRNewswire/ -- Doing something that doesn't work over and over again just doesn't make sense. For example, take conventional risk management, which focuses primarily on protecting existing assets, not future growth. Despite its limited focus on asset protection, conventional risk management doesn't work in today's complex business environment, as evidenced by the recent financial crisis. Deloitte's Frederick Funston and Stephen Wagner conclude that conventional risk management is fatally flawed and counter these shortcomings with intelligence — risk intelligence — in their new book, "Surviving and Thriving in Uncertainty: Creating the Risk Intelligent Enterprise."

Funston and Wagner combine decades of experience as practitioners and advisors on business risk to conceive and advocate what they call the "risk intelligent" approach to enterprise management in their new book. Simply stated, risk intelligence is about better understanding risk as a means to protect existing assets and create future value.

"Most business leaders and risk managers fail to see risk management as part of value creation, which is a major reason we've written this book," said Wagner, who in 2009 retired as managing partner of the Center for Corporate Governance of Deloitte LLP. "Quite the contrary, the goal of effective risk management in business is to preserve existing value and to enable the creation of new value. And, the reality is that value and risk are inseparable."

Henry Ristuccia, managing partner, governance, regulatory & risk strategies services, Deloitte & Touche LLP asserts, "The greatest value of this book lies in its power of demystification. As the authors clearly state, the failure of enterprise risk management (ERM) can often be tied to needless complexity. Yet, as (Rick) Funston and (Steve) Wagner convincingly demonstrate, a risk infrastructure need not be bloated. Indeed, the best risk management programs are often the simplest, in both design and execution."

"Surviving and Thriving in Uncertainty: Creating the Risk Intelligent Enterprise" is organized into three parts, starting with identifying the problems and challenges leaders of large enterprises confront in managing risk and creating value. The second part of the book describes 10 fatal flaws in conventional risk management and the corresponding skill required to correct and overcome each flaw. Each chapter in this part also contains tools for exercising these specific skills.

The third and final part of the book describes the characteristics of a risk intelligent enterprise and gives a framework for developing this type of organization. In this section, the roles of directors and executives are explained and the leadership challenges they face are discussed. Moreover, guidance is offered on how to orchestrate people, processes and systems to enable superior decision-making in uncertainty and turbulence.

Written primarily for the leaders of an enterprise, a main objective throughout the book is to bring clarity and address the complexity inherent in, and responsible for, the repeated failures of enterprise risk management programs.

"The greatest source of risk and opportunity in any enterprise lies in its assumptions. These include assumptions about, for example, the operating environment and its business model in terms of the way they view the world," said Funston, a principal with Deloitte & Touche LLP. "What tends to kill companies is the obsolescence of their business models, not operations, compliance or reporting risk, which are necessary but not sufficient for competitive advantage."

Funston continues, "Companies need to challenge their assumptions and look for changes in their business environment. Then, they can decide whether to be defensive or offensive. Rapid detection of such changes is essential to survival and success."

Key areas, issues and concepts covered in the book include:

How companies can differentiate between and manage "rewarded" risks and "unrewarded" risks to yield the strongest return on investment
How risk management tools can be used proactively instead of reactively to improve decision making
Perspectives of those who face off against risk, from business directors and senior executives to combat pilots and astronauts
Why doing business based on tradition, habit, or on autopilot can mean a business's downfall
How defining the corporate risk appetite and risk tolerances can help reduce the risk of ruin

An additional feature of the book, to reinforce specific points, is the inclusion of numerous verbatim interviews of CEOs, chairmen, senior executives and directors, as well as other professionals with a vital interest in managing risk in sidebars titled Voice of Experience.

In his Foreword to the book, The Honorable Tom Ridge, first Secretary of the U.S. Department of Homeland Security and former Governor of the Commonwealth of Pennsylvania, wrote, "Any business, in my view, that does not have some measure of risk assessment and risk management embedded in its operational structure and culture is most likely a static and non-innovative enterprise. It has no true situational awareness and thus, in the long term, will have no long term — because it will have neither means for preventing and mitigating crises nor for identifying and optimizing opportunities."

Additional information about and excerpts from the book can be found at www.deloitte.com/us/survivingandthriving.

About Deloitte

As used in this document, "Deloitte" means Deloitte & Touche LLP and Deloitte Services LP, separate subsidiaries of Deloitte LLP. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.