Companies are exposed to a large number of risks from different sources such as globalization, deregulation, environmental changes, technological changes, complicated financial models, and corporate governance changes. Parallel to this, various studies recognize enterprise risk management (ERM) as a new method of organizational control. With the spread of ERM frameworks, this book links the themes of risk to decision-making and strategic processes, moving from the issue of vulnerability in order to increase awareness that risk management cannot be entrusted to fulfillment. Instead, risk management must increasingly be an integral part of the company's decision-making and strategic processes. This book develops an innovative approach to the theme of risk following a business-economic analysis perspective related to the creation of economic value. Traditionally, the issue of risk has been widely explored with regard to finance and financial markets. In this book, risk management as a managerial process will be investigated in order to explore the link between risk and business strategies. Integrating risk assessment methodologies with managerial tools with which business entities can build value to protect their positioning and to enhance their economic and financial standing, this book will be of interest to students and researchers of risk management.
Author(s): Alessandro Capocchi
Publisher: Palgrave Macmillan
Year: 2023
Language: English
Pages: 246
City: London
Preface
Acknowledgments
The Backstory
Contents
About the Author
List of Figures
List of Tables
Part I Risk Management and Vulnerability
1 From Risk to Vulnerability
From the Risk Dimension to the Dimension of Vulnerability
From Economic Vulnerability to Corporate Vulnerability
The Four Types of Vulnerability
The Growing Vulnerability of Companies in Contemporary Economic Systems
Objective and Subjective Management
The Impact of Vulnerability on Corporate Decision-Making and Strategic Processes
References
2 The Ant and the Grasshopper—A Business Story
The Story
Not All Days Are Sunny
Enjoy the Sunshine With Me!
These Pretty Days Are Not So Many, Grasshopper. Soon, the Cold Will Come. We Must Be Ready
“Come, Friend,” It Called. “There Is Room Here, and There Is Food. I’ve Saved Enough for Many Seasons. Come in and Eat”
The Teachings of the Fable
References
3 Everything Is Economics
It Depends—On the Correct Answer to Economic and Business-Economic Questions
Opportunity Cost
Marginal Benefit and Cost
Cost–Benefit Analysis
Differential Analysis
Break-Even Analysis
Rationality Versus Irrationality
References
4 Assessing the Vulnerability of a Business: The State of Its Health
Vulnerability and the Immune System
Assessing the State of Health of the Company
The Asset Composition
How to Read the Balance Sheet to Assess the State of Health of the Company
The Asset Correlation
The State of Health of Two Companies: GAMMA and DELTA
Is It Possible to Reduce the Vulnerability of Company DELTA, and If So, How?
The Economic Performance
References
Part II Corporate Immune System
5 The Immune System
Going Concern Principle
The Immune System: The Level of Capitalization
The Immune System: Provisions for Risks and Charges
Strengthening of the Immune System
Immune System and Corporate Profitability
The Meaning of Price
The Life Cycle of a Company: Accounting Period
References
6 The Immune System and Corporate Vulnerability
The Role of the Immune System in Risk Management
Corporate Vulnerability and Crisis
The Case of Blockbuster
Monitoring of the Corporate Immune System
Why Are Health and Immune System Monitoring Performed with Only Two Indicators?
The Corporate Vulnerability of Italian Companies: A Practical Case
Summary Considerations
References
7 Operational Risk and Immune System
To Be Profitable
The Production Capacity
Technical Efficiency and Economic Efficiency
The “Kreislauf”
The Risk of Being Inefficient
The Double Cost of Technical Inefficiency
The Economic Impact of Technical Inefficiency on the Immune System
The Warehouse Is a Tool to Mitigate the Risk of Technical Inefficiency
Overbooking as a Tool to Mitigate the Negative Economic Impact of Technical Inefficiency
References
Part III Integration, Classification and Risk Management Activities
8 The Internal Control Risk Management System (ICRMS)
Risk Perception
Risk, Uncertainty, and Ambiguity
From Expected Utility to New Models with Descriptive Approaches
Risk Aversion
Loss Aversion
The Willingness to Risk
The Internal Control and Risk Management System—ICRMS
References
9 The Classification of Risks and the Activities that Make up Risk Management
The Classification of Corporate Risks
Business and Financial Risks
Expansion of Production Capacity
Different Approaches to Risk Management
The Activities that Makeup Risk Management
Risk Estimation
The Collection of Interviews with Managers, Experts, Consultants, Professionals, and Stakeholders
Identification of Risks and Risk Drivers
Value at Risk (VaR)
Summary Considerations
References
Part IV Practical Experiences
10 Case Studies: Pirelli–NatWest–Eni–Ocado–Ryanair
Pirelli
Brief Description of the Company
The Risk Management Structure
Risks Identification
Discussion and Analysis
Questions
NatWest
Brief Description of the Company
Risk Management Structure
Risk Identification
Discussion and Analysis
Questions
ENI Group
Brief Description of the Company
Risk Management Structure
Risk Identification
Discussion and Analysis
Questions
Ocado
Brief Description of the Company
Risk Management Structure
Risk Identification
Discussion and Analysis
Questions
Ryanair Group plc
Brief Description of the Company
Risk Management Structure
Risk Identification
Discussion and Analysis
Questions
References
Part V Conclusion
11 “Rational Globalization” and the Search for an Alternative Way Out
Reference
Index
