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The Complete Idiot's Guide to Risk Management
Manage the risk and maximize the reward!
Risk. It's what business is all about. The key to success is to anticipating and managing the risks that can impact business. The Complete Idiot's Guide(r) to Risk Management provides the key information necessary to manage business risk successfully.
?The basic categories of business risk
?How to indentify the specific factors that affect any particular business
?How to create practical risk models to plan ahead
?How to lessen the impact of risk events should they happen
?How to profit from strategic risk taking
Risk. It's what business is all about. The key to success is to anticipating and managing the risks that can impact business. The Complete Idiot's Guide(r) to Risk Management provides the key information necessary to manage business risk successfully.
?The basic categories of business risk
?How to indentify the specific factors that affect any particular business
?How to create practical risk models to plan ahead
?How to lessen the impact of risk events should they happen
?How to profit from strategic risk taking
368 pages, Paperback
First published January 18, 2010
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53 people want to read
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Displaying 1 - 3 of 3 reviews
December 31, 2021
Every now and then when rummaging around in Amazon looking for things to read, I’ll come across a book in the “Complete Idiot’s” series or the “For Dummies” sequence that gets great reviews. Usually these beginners guides are pretty mediocre. I stumbled across this book and it was well-reviewed — this was interesting to me because many of the standard books on risk are highly technical: So I thought I’d see what Annetta Cortez could teach me.
This is a super interesting exploration of the ways companies can manage risk. It’s a little slow-going and the chapters overlap, which can be tedious. Still, the book goes into a lot of good detail around categorizing risk, measuring risk, etc. The book walks through a number of key calculations for “expected loss,” “unexpected loss,” “probability of default,” “probability of event,” etc. All of this leads up to the “risk-adjusted return on capital” (RAROC). If you can understand and use RAROC, you can understand the likelihood of reward: That is, you can use risk analysis and management not only to avoid loss, but to find profits.
There were some real surprises to me. I guess it is not a surprise that expected loss is just the average of prior losses. But what is unexpected loss? This is where you look at the historical deviations from the mean (in fact it is the standard deviation). Huh. Interesting. If you can compute the unexpected loss, isn’t that a prediction? So it came as a surprise to me that you can, essentially, expect “unexpected loss.”
The book has some flaws and could use a 2nd edition. In a couple of places (pp. 134 and 155) reference is made to an “Appendix E” which promises to provided references for more sophisticated models: Well, there isn’t an Appendix E. The index is somewhat incomplete. On occasion, the book will use an abbreviation such as PE and not say what is meant (it’s probability of event). There is a glossary, but it doesn’t provide page references to first use (since the index is incomplete, this could help).
The book ends with a few case studies. These are quite interesting. The first one concerns a company that doesn’t understand its risks and gets into trouble. But the author doesn’t tell us that the company should have understood its risks better using risk management per se — it says that the CEO wasn’t watching the company closely enough. In other words, the “fix” to the lack of risk understanding was simply . . . Better management. So in this case study, it turns out that all of the technical stuff in the book is immaterial. Another case study is about a company that goes bananas for risk management, but forgets to understand that as they make more risky investments, they have to have a lot of cash on hand for investments that, while unlikely based on the analysis, go haywire. In other words, they did too much risk analysis of the wrong kind. This again serves to warn us against much of the meat of the book.
Finally, I found it fascinating because companies in a lot of lines of business (e.g., healthcare) are making deals that are based on risk calculations; meanwhile, the people who invented the risk models are discovering issues with the incentives drawn from the risk modeling. I think this means that the book is as much of a warning against risk modeling as it is a guide for it.
This is a super interesting exploration of the ways companies can manage risk. It’s a little slow-going and the chapters overlap, which can be tedious. Still, the book goes into a lot of good detail around categorizing risk, measuring risk, etc. The book walks through a number of key calculations for “expected loss,” “unexpected loss,” “probability of default,” “probability of event,” etc. All of this leads up to the “risk-adjusted return on capital” (RAROC). If you can understand and use RAROC, you can understand the likelihood of reward: That is, you can use risk analysis and management not only to avoid loss, but to find profits.
There were some real surprises to me. I guess it is not a surprise that expected loss is just the average of prior losses. But what is unexpected loss? This is where you look at the historical deviations from the mean (in fact it is the standard deviation). Huh. Interesting. If you can compute the unexpected loss, isn’t that a prediction? So it came as a surprise to me that you can, essentially, expect “unexpected loss.”
The book has some flaws and could use a 2nd edition. In a couple of places (pp. 134 and 155) reference is made to an “Appendix E” which promises to provided references for more sophisticated models: Well, there isn’t an Appendix E. The index is somewhat incomplete. On occasion, the book will use an abbreviation such as PE and not say what is meant (it’s probability of event). There is a glossary, but it doesn’t provide page references to first use (since the index is incomplete, this could help).
The book ends with a few case studies. These are quite interesting. The first one concerns a company that doesn’t understand its risks and gets into trouble. But the author doesn’t tell us that the company should have understood its risks better using risk management per se — it says that the CEO wasn’t watching the company closely enough. In other words, the “fix” to the lack of risk understanding was simply . . . Better management. So in this case study, it turns out that all of the technical stuff in the book is immaterial. Another case study is about a company that goes bananas for risk management, but forgets to understand that as they make more risky investments, they have to have a lot of cash on hand for investments that, while unlikely based on the analysis, go haywire. In other words, they did too much risk analysis of the wrong kind. This again serves to warn us against much of the meat of the book.
Finally, I found it fascinating because companies in a lot of lines of business (e.g., healthcare) are making deals that are based on risk calculations; meanwhile, the people who invented the risk models are discovering issues with the incentives drawn from the risk modeling. I think this means that the book is as much of a warning against risk modeling as it is a guide for it.
February 22, 2017
Great book, very informative!
I'm actually studying actuarial science, but this was a great introduction to a related (necessary) topic. Very readable and easy to understand.
I'm actually studying actuarial science, but this was a great introduction to a related (necessary) topic. Very readable and easy to understand.
January 11, 2012
Gets the job done as an overview of risk management language and strategies.
Displaying 1 - 3 of 3 reviews