The Fundamental Rules of Risk Management: 1st Edition (Hardback) book cover

The Fundamental Rules of Risk Management

1st Edition

By Nigel Da Costa Lewis

CRC Press

240 pages | 5 B/W Illus.

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pub: 2012-05-29
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Description

The consequences of taking on risk can be ruinous to personal finances, professional careers, corporate survivability, and even nation states. Yet many risk managers do not have a clear understanding of the basics. Requiring no statistical or mathematical background, The Fundamental Rules of Risk Management gives you the knowledge to successfully handle risk in your organization.

The book begins with a deep investigation into the behavioral roots of risk. Using both historical and contemporary contexts, author Nigel Da Costa Lewis carefully details the indisputable truths surrounding many of the behavioral biases that induce risk. He exposes the fallacy of the wisdom of experts, explains why you cannot rely on regulators, outlines the characteristics of the "glad game," and demonstrates how high intelligence or lack thereof can lead to loss of hard-earned wealth. He also discusses the weaknesses and failures of modern risk management.

Moving on to elements often overlooked by risk managers, Dr. Lewis traces the link between corporate governance and risk management. He then covers core lessons surrounding the role of risk managers as well as the difficult subject of integrated, single lens analysis of risk. The book also explores aspects of spreadsheet risk and draws on lessons learned in the information systems and software engineering communities to provide guidance on selecting the right risk management system. It concludes with a discussion on the most dominant of risk measures—value at risk.

Having a clear understanding about risk separates successful professionals, companies, and economies from history’s forgotten failures. Through examples and case studies, this thought-provoking book shows how the rules of risk can work to protect and enhance investor value.

Table of Contents

Section I: The Behavioral Foundations of Risk Management

Unreason Is the Even Eviler Twin Brother of Greed

A Word to the Wise—You Cannot Rely on the Flynn Effect

The Unintended Consequences of the Glad Game

But You Have to Remember Ivar Kreuger of Kalmar!

The Maleficent Hand of the Men in Gray Suits

Unreason Abounds in Places Where It Must Not

The Conspiratorial Regulator

The Apathetic Regulator

The Unpalatable Truth about Risk Management

A Rather Vulgar, But Common, Perception of Risk Management

The Emperor of Risk, His Lyre, and the Palatine

The Utter and Total Redundancy of Financial Risk Management

The Risk Manager as a "Quivering Dastard"

Perception and Reality about Risk Management

For Further Thought

Additional Resources

Appendix

Section II: What You Need to Know, but Nobody Wants to Tell You

What the Textbooks Will Not Tell You about Corporate Governance

The Essence of the Governance Issue

The Superficiality of Compliance

Why "Gentleman’s" Agreements Do Not Work

The Role of Criminal Penalty

The Benefit of Wolf Pack Capitalism

The Inherent Ethos of Risk Management

The Cost of Corporate Governance

Why Governance Failures Are Inevitable

For Further Thought

Additional Resources

The Most Important Lesson a Risk Manager Must Know

Odysseus and the Sirens’ Song

The Consequence of Ignoring the Golden Rule

An Immutable Condition for Success in Risk Management

For Further Thought

Additional Resources

A Powerful Secret from Henry Fayol

The Great Work: General and Industrial Management

The Rise of Fayol’s "Strategic Security Director"

The Warren Buffet Principle of Risk Management

Can Chief Risk Officers Add Value?

For Further Thought

Additional Resources

The Incredible Advantage of a Monocle on Risk

What Is a Monocle on Risk?

The Hidden Dangers of Risk Management Silos

The Need for Better Risk Management

The Challenge

The Three Essential Elements of Successful Risk Integration

For Further Thought

Additional Resources

Benefit from the Fable of Spreadsheet City

Don’t Be a Victim of Spreadsheet Hell

Why Spreadsheet Failure Costs Big Time!

How to Bring Spreadsheet Risk under Control

Understanding the Nature of Spreadsheet Error

The Principles of Spreadsheet Engineering

The Potential of Compilable Spreadsheets

Seven Rules for Superior Spreadsheet Design

How to Minimize Risk through Formal Testing

For Further Thought

Additional Resources

How to Guarantee Success by Understanding the Nature of Failure

The Value Added of Vendor Risk Information Systems

How to Guarantee Success by Understanding the Nature of Failure

Developing a Winning Game Plan

Creating a High Performance Team

The Important Lesson of ½ × n × (n − 1)

The Critical Role of Executive Buy-In

Clarifying Your Requirements

The Truth about Project Managers

For Further Thought

Additional Resources

Snake Oil Salesmen, Goat Gonads, and Value at Risk

VaR Explained

The Joyous Exclamation of Simons

The Tipping Point

What the Rocket Scientists May Not Tell You, But You Need to Know

For Further Thought

Additional Resources

Index

Notes appear at the end of each chapter.

About the Author

Nigel Da Costa Lewis is a speaker, writer, and researcher on the uncertainty, risk, and irrational bias found in investing. Dr. Lewis has authored four books as well as numerous articles in international publications, such as the Journal of Investing, Journal of Wealth Management, and Pensions. He earned four master’s degrees from the University of London and a PhD from the University of Cambridge. His current research focuses on asset allocation, impact of fees on retirement savings, maximization of retirement accounts, new forms of diversification, life-cycle investing, intelligent portfolio optimization, and post-retirement optimal asset allocation. Visit www.nigeldlewis.com for more information.

About the Series

Chapman & Hall/CRC Finance Series

Learn more…

Subject Categories

BISAC Subject Codes/Headings:
BUS027000
BUSINESS & ECONOMICS / Finance
BUS042000
BUSINESS & ECONOMICS / Management Science
MAT000000
MATHEMATICS / General