We begin with an overview of value-focused enterprise risk management. Different categories of risk are discussed, and key factors for successful ERM are presented: building a shareholder value protection perspective, quantification of uncertainty, establishing a corporate risk tolerance, implementation of the ERM process, and risk management solutions, roles, and responsibilities. The course outline is presented to show how each topic is related to building each of the ERM success factors.

This interactive session provides an initial understanding of the empirical sources of value destruction. First, research conducted by SDG on the source of value destruction is presented. We show that fraud - the main focus of compliance frameworks - is a minor cause of value destruction. In advance of the course, participants are provided with data on a few companies that lost significant shareholder value relative to their industry peers and some background information on each company. Participants analyze the causes of value destruction for these companies and share their ideas through class discussion.

Class participants work on two case exercises in the course. In the first, participants work on identifying and prioritizing risks for a chosen company. In the second case exercise, participants explore risk-mitigating strategies based on quantified risk outputs for chosen companies that are based on real corporate cases. Materials for course case exercises are handed out on the first day of the course.

Gary Waldock, Director of PWC
A leading professional gives an overview of the compliance (COSO) perspective on enterprise risk management. The COSO framework, as amended in 2004, emphasizes the importance of identifying and managing risks across the enterprise. Mr. Waldock will cover the eight components of the new COSO framework:

Ted Murphy, former CRO of Cinergy Corporation This former chief risk officer of a major power company shares his experience in this role and how different risks are managed in diverse organizations. We probe the different role definitions for CROs in corporations using the electric utility industry as our example.

Learn how much risk a company should take, considering its size and risk preference. Practical ways of assessing risk tolerance are presented. Systematic distortions in risk taking behaviors are examined. You will gain an understanding of the value and use of an explicit corporate risk policy in generating more opportunities and making decisions.

This session addresses application of the ERM framework in a company setting. The case study is based on an actual consulting assignment in which SDG assisted a company in quantifying uncertainties regarding its short-term corporate earnings by identifying risk drivers from business units with different risk profiles.

Richard Meyer, Harvard Business School
Professor Meyer is a pioneer in the applied field of decision science, has taught the subject of financial risk management at the Harvard Business School for many years, and has served as a corporate director with risk management oversight responsibilities. His current research and course development focus on the use of derivatives to hedge financial risk in corporations. Professor Meyer draws on his vast experience and HBS cases that he developed to illustrate financial risk management issues in the corporate setting.

M. Elisabeth Paté-Cornell, Stanford School of Engineering
Professor Paté-Cornell chairs the department of Management Science & Engineering at Stanford and is a world leader in research related to engineering risk analysis, risk management, decision analysis under uncertainty, and more generally the use of Bayesian probability to process incomplete information. She is currently working on risk management processes for complex projects and programs, with application to space, industrial, and medical systems. Since 2001, she has been applying risk analytic methods to the study of different types of terrorist attacks on the United States, the assessment of intelligence information, and the effectiveness of countermeasures. Professor Paté-Cornell provides course participants with the perspectives needed to understand, prevent, and respond to major sociotechnical failures.

In this session, we describe four interrelated risk perspectives and how to embrace uncertainty in planning. We also focus on the relationship between value drivers, surprises, intrinsic value, and market value. We illustrate the concepts through case studies.

Panelists: Richard Meyer, Harvard Business School, Ted Murphy, former CRO of Cinergy Corporation; Carl Spetzler, SDG; moderator: David Fishman, SDG Panel Discussion
How does a director or senior executive oversee risk management? What are the important policies? How does one set the right tone to reduce risk exposures while encouraging appropriate risky opportunities? What are the responsibilities and governance processes for risk management? How do we avoid breakdowns in this oversight role? Course participants engage with the panel on these governance and organizational risk management questions.

We end by summarizing the key learnings from the course, with participants sharing what they found most useful and applicable in their situations.