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The Essentials of Risk Management Hardcover – December 14, 2005

ISBN-13: 978-0071429665 ISBN-10: 0071429662 Edition: 1st

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Product Details

  • Hardcover: 416 pages
  • Publisher: McGraw-Hill; 1 edition (December 14, 2005)
  • Language: English
  • ISBN-10: 0071429662
  • ISBN-13: 978-0071429665
  • Product Dimensions: 1.3 x 6.1 x 8.9 inches
  • Shipping Weight: 1.6 pounds
  • Average Customer Review: 4.1 out of 5 stars  See all reviews (22 customer reviews)
  • Amazon Best Sellers Rank: #146,878 in Books (See Top 100 in Books)

Editorial Reviews

From the Back Cover

Learn powerful corporate governance and risk strategies to control both financial and non financial risks

Risk is an integral component of every forward looking transaction. Now more than ever before, it is essential to understand the multiple dimensions of risk as well as how to best manage risk to gain a competitive advantage. The Essentials of Risk Management offers a strikingly clear picture of how to construct a superior risk management program.

The Essentials of Risk Management provides you with a practical, non-ivory tower approach that is necessary to effectively implement a superior risk management program. Written by three of the leading figures with extensive practical and theoretical experience in the global risk management and corporate governance arena, this straightforward guidebook features such topics as:

  • Corporate governance, compliance and risk management
  • How to implement integrated risk management
  • Measuring, managing and hedging market, credit (retail and corporate), operational and model risk
  • The roles of board members and senior management in managing risk

As corporate scandals continue to make headlines and erode shareholder confidence, risk becomes everyone's responsibility. The Essentials of Risk Management will empower both the technical and non technical reader with the essential knowledge necessary to understand and manage risks in any corporate or economic environment.

About the Author

Michel Crouhy, Ph.D., is the head of research and development and financial engineering at IXIS Corporate and Investment Bank (Groupe Caisse d'Epargne). He has the bankwide oversight on all quantitative research and the development of new products and applications supporting the trading and structuring businesses.

Dan Galai, Ph.D., is the Abe Gray Professor of Banking and Finance at The Hebrew University. He is a co-CEO of Sigma PCM, an investment banking firm. Galai has consulted for the Chicago Board Options Exchange and the American Stock Exchange, and for many major banks and corporations.

Robert M. Mark Ph.D., is the Chief Executive Officer of Black Diamond, which provides corporate governance, risk management consulting, and transaction services. He is the chairperson of The Professional Risk Managers' International Association's (PRMIA) Blue Ribbon Panel. He was awarded the Financial Risk Manager of the Year by the Global Association of Risk Professionals (GARP).


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Customer Reviews

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Recommended for all who have an interest risk management.
Amazon Customer
This also brings up the question of how to assess the quality of the risk management strategies of a particular financial institution.
Dr. Lee D. Carlson
Easy reading and comprehensible, without all the math formulas some other authors include.
JJMI

Most Helpful Customer Reviews

59 of 63 people found the following review helpful By Dr. Lee D. Carlson HALL OF FAMEVINE VOICE on July 11, 2006
Format: Hardcover Verified Purchase
This book provides an introduction to the field of risk management for readers who do not yet want to get deeply involved in the mathematical formalism that is typically used. The authors wrote the book so that it is "accessible to everyone", and they have done a fine job. Those readers who need a more quantitative treatment will have to consult another book or the vast research literature on the subject. Risk management, as they see it, is an attempt to estimate both the `expected' losses and the `unexpected' losses, and being able to differentiate between these two concepts goes to the core of the subject. Thus the book emphasizes the "intuition" behind risk management, and not the formalism. However, one must not conclude from this that "intuition" and "formalism" are distinct, and the belief that they are has resulted in a lot of confusion (and financial losses) in recent years. The authors clearly do not believe that they are, but have merely emphasized "intuition" from a pedagogical point of view.

The authors classify risk into eight categories, namely market, credit, liquidity, operational, legal and regulatory, business, strategic, and reputation risk. Financial risk, as they see it, is composed of two of these, namely market and credit risk. Their discussion of corporate risk management is very interesting, in that it begins with the observation first made almost forty years ago that the value of a firm is not altered solely by financial transactions. This is due to their assumption of the perfect market hypothesis, which effectively suppresses the ability of the firm to gain significant advantages over an individual investor. Therefore with this assumption a firm should not concern itself with risks outside of the ones that all other firms face.
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21 of 26 people found the following review helpful By John Matlock on April 18, 2006
Format: Hardcover
The essense of investing is that increased risk should be compensated for by increased return. The problem lies in measuring and thus managing risk. Measuring risk is in the same category as predicting the future. The future is uncertain, the best guesses fail as bad weather, oil embargoes, or any of a whole list of other incidents change the situation.

Risk management isn't simply a matter of avoiding risk. It is instead a matter of identifying it, measuring it, appreciating its consequences and then taking actions accordingly. Insurance is perhaps the best example.

If a hundred sailing ships go out and 90 return, spreading the risk among all hundred ships compensates for the loss of the ten. And Lloyds is born.

During recent years several techniques have been developed to measure risk. This book discusses them in a non-mathematical way that can be used by both risk and non-risk professionals. In essence it brings sophisticated techniques to be accessible to a wide audience.
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5 of 5 people found the following review helpful By David R. Harper on February 4, 2009
Format: Hardcover
This is a broad, gentle introduction to risk. As it means to be non-technical, it is stronger as a discussion of qualitative issues like governance and weaker as an introduction to deep topics like Basel II and value at risk (VaR).

What I like about this book

It succeeds in putting risk measurement in perspective, from 10,000 feet. Chapter 1 nicely summarizes why risk measures are helpful and "dangerous." In this respect, the authors actually go further than Taleb's Black Swan by hinting at solutions. Taleb basically says we necessarily abuse models (my paraphrase of his entire book). We can all stipulate to that. The relevant question is, knowing our risk models do not describe natural phenomena, what do we do about it: how do we improve them and, a different question, what is their proper use (e.g., support, situation, context)? It's hard to find good study on model risk but this book touches on it quite a bit. In a way, i think the book's strength is as a primer on model risk.

Chapter 4 is helpful on risk governance, including roles (risk advisory director). The credit crisis, like some before, has re-surfaced the importance of governance.

It is a very accessible scan of various risk topics. The authors boiled down their formidable research on risk adjusted return on capital (RAROC) into a quick review. Great intro to economic capital and OpRisk VaR. Basel II is summarized into the smallest space I've seen.

What I don't like

Bending over backwards to be non-technical can lead to confusion. The central limit theorem (CLT), being slightly misstated, is given too much application (i.e.
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10 of 12 people found the following review helpful By Y. Wong on August 1, 2007
Format: Hardcover
I would highly recommend this book to the begginer/budding Risk Manager

For the experienced risk professional, this is a bit too fundamental.
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7 of 9 people found the following review helpful By Aasim on September 8, 2011
Format: Hardcover Verified Purchase
The title of the book is a bit misleading. The book should've been labelled "The Essentials of Financial Risk Management in the Banking Industry." I expected the "risk management" to be more general. Partly my fault, the book is probably not bad for someone who is looking for the specific information the book has to offer.
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3 of 4 people found the following review helpful By JJMI on April 14, 2010
Format: Hardcover Verified Purchase
Great book to get introduced to risk management. Easy reading and comprehensible, without all the math formulas some other authors include. Have used it often in my consulting work! Highly recommended also for beginners and all interested in risk management, a good re-fresher!
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