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Enterprise Risk Management: From Incentives to Controls [Kindle Edition]

James Lam
4.6 out of 5 stars  See all reviews (13 customer reviews)

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Book Description

Enterprise risk management is a complex yet critical issue that all companies must deal with as they head into the twenty-first century. It empowers you to balance risks with rewards as well as people with processes. But to master the numerous aspects of enterprise risk management, you must first realize that this approach is not only driven by sound theory but also by sound practice. No one knows this better than risk management expert James Lam. In Enterprise Risk Management: From Incentives to Controls, Lam distills twenty years' worth of experience in this field to give you a clear understanding of both the art and science of enterprise risk management.

Organized into four comprehensive sections, Enterprise Risk Management offers in-depth insights, practical advice, and real world case studies that explore every aspect of this important field.

  • Section I: Risk Management in Context lays a solid foundation for understanding the role of enterprise risk management in today's business environment.
  • Section II: The Enterprise Risk Management Framework offers an executive education on the business rationale for integrating risk management processes.
  • Section III: Risk Management Applications discusses the applications of risk management in two dimensions-functions and industries.
  • Section IV: A Look to the Future rounds out this comprehensive discussion of enterprise risk management by examining emerging topics in risk management with respect to people and technology.
JAMES LAM is President of James Lam & Associates, an independent risk advisory firm. Before starting his own firm, Lam was founder and president of ERisk and partner of Oliver, Wyman & Company. In 1997, as chief risk officer at Fidelity Investments, he was named the first-ever Financial Risk Manager of the Year by the Global Association of Risk Professionals. Prior to Fidelity, he was chief risk officer of Capital Markets Services, Inc., a GE Capital Company. Lam graduated with honors from Baruch College and received his MBA from UCLA. He is also currently an Adjunct Professor of Finance at Babson College.


Editorial Reviews

From the Inside Flap

Enterprise risk management is a complex yet critical issue that all companies must deal with as they head into the twenty-first century. It empowers you to balance risks with rewards as well as people with processes. But to master the numerous aspects of enterprise risk management, you must intergrate risk management into the culture and operations of the business. No one knows this better than risk management expert James Lam. In Enterprise Risk Management: From Incentives to Controls, Lam distills twenty years worth of experience in this field to give you a clear understanding of both the art and science of enterprise risk management.

Organized into four comprehensive sections, Enterprise Risk Management offers in-depth insights, practical advice, and real-world case studies that explore every aspect of this important field. Section I: "Risk Management in Context" provides an introduction and foundation for the rest of the book. You’ll learn why a company should strive for balance between risk and return, and discover some of the basic reasons why risk management is such an important issue in business today. You’ll also learn seven essential risk management lessons through discussions of some of the major financial disasters of years past. With this knowledge in hand, you’ll be introduced to some of the key concepts, processes, and tools underlying risk management.

In Section II: "The Enterprise Risk Management Framework," you’ll receive an executive education on the business rationale for integrating risk management processes, and discover the seven building blocks for developing an enterprise risk management program. You’ll also discover how the role of Chief Risk Officer has changed in today’s firm.

Section III: "Risk Management Applications" discusses the applications of risk management in two dimensions–functions and industries. You’ll become familiar with the functional requirements for credit, market, and operational risks, as well as learn how risk management has evolved from a control function to a function that enables performance optimization. Industry segments including financial institutions, energy firms, asset management firms, and nonfinancial corporations are also explored with an eye toward key business trends and risk management requirements in these sectors.

Section IV: "A Look to the Future" rounds out this comprehensive discussion of enterprise risk management by examining emerging topics in risk management with respect to people and technology. A forward-looking story reveals how best-practice risk management might look in the year 2010.

Failure to properly manage risk continues to plague corporate America–from Enron to Long-Term Capital Management. Don’t let it hurt your organization. Pick up Enterprise Risk Management and learn how to meet the enterprise-wide risk management challenge head on–and succeed.

From the Back Cover

Praise for Enterprise Risk Management

"In the aftermath of Enron, WorldCom, and Sarbanes-Oxley, every publicly traded company should be concerned about risk management. This book takes a pragmatic approach to risk management that can benefit any CEO or senior executive. Lam lays out clear strategies to address what is often a highly complex issue."
–William L. Walton, Chairman and CEO, Allied Capital Corporation

"James Lam provides one of the most practical, insightful books on risk management that I have read in the last thirty years. It clearly reflects experience and deep understanding of the art as well as the science in risk management practices. A must-read for all who wish to advance risk management practices in their businesses."
–Sandra Jansky, Executive Vice President, Chief Credit Officer, SunTrust Banks, Inc.
Chairperson, Risk Management Association

"In this book, James Lam has provided an effective overview of business risk. Enterprise Risk Management will be useful to professional risk managers and business executives seeking to understand the latest tools and organizational approaches."
–Robert Simons, Charles M. Williams Professor of Business Administration,
Unit Head–Accounting & Control, Harvard Business School

"The most comprehensive and engaging handbook on enterprise risk management, written by the pioneer of the Chief Risk Officer function. Filled with practical examples and lessons learned, this book is destined to become one of the most widely read primers on today’s top business initiative. James Lam is the authority on enterprise risk management, and I highly recommend this book to all board directors, senior executives, and risk managers."
–Cassandra R. Schultz, Vice President and Chief Risk Officer, KeySpan Corporation

"James Lam’s book Enterprise Risk Management: From Incentives to Controls provides an insightful road map to best practices in risk management. Based on a solid and successful career in risk management, James’s advice is both timely and relevant and should be required reading for all risk management professionals."
–Michael J. Litwin, Chief Credit and Risk Officer, Merrill Lynch Capital


Product Details

  • File Size: 4557 KB
  • Print Length: 336 pages
  • Publisher: Wiley; 1 edition (May 30, 2003)
  • Language: English
  • ASIN: B000YIWEMU
  • Text-to-Speech: Enabled
  • X-Ray:
  • Word Wise: Not Enabled
  • Lending: Not Enabled
  • Amazon Best Sellers Rank: #1,095,671 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
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Customer Reviews

Most Helpful Customer Reviews
12 of 13 people found the following review helpful
Format:Hardcover
James Lam has written a remarkably clear and relevant portrayal of how [enterprise] risk management can be used to deliver real value in any business.

During the past year, I developed a course for the Executive MBA program at Villanova University. After reviewing several books on the subject, I chose this one because of its clear and comprehensive coverage of the subject matter.

I would highly recommend this book to anyone with a serious interest in understanding risk management from a holistic perspective. This includes risk professionals as well as those involved in line and staff functions.
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17 of 21 people found the following review helpful
5.0 out of 5 stars Remarkably Succinct Coverage of a Hot New Topic February 4, 2005
Format:Hardcover|Verified Purchase
You bought Jorion, Pearson, and Hull; you slammed headfirst into the quantitative quagmire of risk management, and you may even have passed the Financial Risk Manager exam, sponsored by the Global Association of Risk Professionals, but are you prepared to become your company's "Risk Champion?" Can you explain to laymen why loss distributions are not normal? Can you illustrate the "sweet spot" in the profit/risk tradeoff? If you aren't quite there yet, pick up James Lam's new book, Enterprise Risk Management, From Incentives to Controls. It's a book you can read on the five hour flight from New York to Los Angeles, and its melodies will linger in your memory. This book has changed the way I communicate with people both in and outside the risk management profession. Read it with a highlighter in your hand, and keep the book within easy reach.
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5 of 5 people found the following review helpful
4.0 out of 5 stars Definitely Worth a Read January 31, 2008
Format:Hardcover
A well-written guide to enterprise risk management from somebody who knows it first hand. The book covers all of the relevant topics within ERM: concepts and processes, governance, risk transfer, analytics, risk types, and applications to the business (lessons learned, case studies, etc.).

The book is tilted towards banking and energy and could use an update on how ERM has become vogue among corporations in almost every other sector. It could also include more information on operational risk and Sarbanes-Oxley requirements, as well as more recent info on the topic from leading risk organizations and projects (COSO and others). It is not a one stop shop on the subject - hence just four stars.

If you have a chance to work with risk managers and/or risk consultants, see the latest dashboard tools, or sit in on risk assessment and ranking exercises, I believe you'll get much more from the book. There is a lot of "dot-connecting" that needs to go on with ERM.

And a special endorsement...I once received a very attractive offer from a leading Fortune 500 company for an enterprise risk manager position. I had just a little experience with ERM, but I used material from this book to get me through six probing interviews. Very few books can help a candidate quite the way this one helped me.
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2 of 2 people found the following review helpful
5.0 out of 5 stars Revisiting Lam's Predictions for the future of ERM April 4, 2012
Format:Hardcover
A little under ten years ago I reviewed "Enterprise Risk Management: From Incentives to Controls" by James Lam in Risk Professionals, the flagship magazine of the Global Association of Risk Professionals (GARP). In the book, Lam made ten predictions for the future of risk management. Ten years later, it is interesting to revisit his predictions and ask how many have come to pass.

Here are the predictions with my comments:

1. Enterprise Risk Management (ERM) will become the industry standard for risk management.
Not just yet, but it's on its way. Among the key findings in a recent Accenture 2011 Global Risk Management Study was, "More than 80 percent of the survey respondents overall have a ERM program in place or plan to have one in the next two years."

The study was based on a survey of C- level executives from 397 companies across ten industries in Europe, North America, Latin America and Asia. Similar studies confirm the same trend. There is not enough space, here, to name them all.

2. The CRO will become prevalent in risk intensive businesses.
As Lam states in his book, "The rise of the CRO goes hand-in-hand with the trend toward ERM". Again from the same study above, "Companies are establishing C-level oversight of the risk management function."

About two thirds of all survey respondents have a Chief Risk Officer operating with that title. Another 20 percent have an executive in the role fulfilling those responsibilities. Thus the criticality of risk management is being recognized by the way the function is staffed and led. That said, there is still a chasm between the traditional risk management model and ERM.
Read more ›
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13 of 19 people found the following review helpful
By GGW
Format:Hardcover|Verified Purchase
This book by James Lam provides an excellent insight into this current business strategic problem. In view of all the corporate governance coming from Sarbannes-Oxley legislation and Basel II capital pronouncements, this book provides the user with the building blocks in terms of explaining how credit, market, and operational risk all tie into the big picture of enterprise risk. The author enables one to understand these risks without getting bogged down in mathematical details. He effectively brings these risks together in terms of portfolio management and then presents the reader with some risk mitigation techniques. He goes beyond other books which just concentrate on financial institutions by bringing in energy firms and nonfinancial corporations in his concluding chapters. Lam's book is a must read for anyone considering a career in risk management.

Gerald G. Wisz, Ph.D.

Adjunct Associate Professor of Finance

Polytechnic University, Brooklyn NY

Independent Risk Management Consultant
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Most Recent Customer Reviews
3.0 out of 5 stars Very Basic. Good Summary
The book has a very basic and elementary level. Probably this is due to the great array of topics it includes. It is a very high level overview of risk management concepts. Read more
Published on January 20, 2009 by Damian Scelato
3.0 out of 5 stars Great for the novice Risk Manager
If you are a budding Risk Manager/ Officer or are considering a career move towards Risk Management, this book is a good high-level illustration of what the major sleeves of Risk... Read more
Published on July 26, 2006 by David R. Egloff
5.0 out of 5 stars A well written and thought out book on Risk Management
This book provides practical and insightful look at risk management and how it can benefit companies. Read more
Published on October 4, 2004 by Wahyu Suryadi
5.0 out of 5 stars A Must Read for Risk Management
This book is not only about the theory of enterprise risk management, but also a summary of the author¡¯s experience in practicing risk management for more than twenty years. Read more
Published on August 22, 2004 by cqhuang
5.0 out of 5 stars The book for ALL CROs and CFOs
Thank you for writing this book. This book is must read for all CROs and CFOs. Looking forward to reading your coming Risk Management books.
Published on November 7, 2003 by Kok Yuen, MAYBANK's Risk Strategy
5.0 out of 5 stars Critical but Easy to Read and Comprehend
Anyone whose career interests intersect with the risk management discipline will find this book extremely valuable in understanding the risk management discipline and viewpoint. Read more
Published on September 24, 2003 by Edward Paules
5.0 out of 5 stars ERM Made Practical and Executable
James Lam, the founder of ERisk and the pioneer for the chief risk officer concept has penned the best and most comprehensive book yet on enterprise risk management and how this... Read more
Published on August 26, 2003 by Chris Mandel
5.0 out of 5 stars Enterprise Risk Management: From Incentives to Controls
Excellent resource on Enterprise Risk Management.
The author draws upon his 20 years' rich real world experience to drive the subject to home. Read more
Published on July 21, 2003
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