Foreword.
Preface.
Acknowledgments.
Introduction.
Why Manage Risk?
Why is Risk Management Difficult to Implement?
Chapter 1: What is Risk?
The Business of Risk.
Defining Risk: Loss, Uncertainty, and Horizon.
More Ways to Think about Risk.
Taxonomy of Risks.
Risk and Reward: Modern Portfolio Theory.
Chapter 2: Risk Management Principles.
Words to Live by.
Know Your Risks.
Articulate Your Risk Appetite.
Develop a Well-Defined Risk Culture.
Use a Common Language.
Develop Capabilities and Approaches in Line with the Size, Complexity, and Culture of Your Organization.
Make It Transparent and Comprehensive.
Construct Clear Limits and Controls.
Align Performance and Incentives to Risk and Reward.
Develop Comprehensive Forecasting, Stress-Testing, and Challenge Processes.
Provide Active Leadership and Direction.
Construct Strong Governance and Oversight.
Make Continuous Improvements.
Chapter 3: Building the Risk-Management Framework.
All the Right Elements.
Your Risk Management Organization.
Your Risk Culture.
Your Governance Model.
Your Policies and Processes.
Your Data and Systems.
Chapter 4: Measuring Risk and Capital.
Why Measure Risk?
Laying Out the Fundamentals, from the Top Down.
Probability, Exposure, and Severity.
Probability Distributions.
Expected Loss.
Unexpected Loss and Value at Risk.
Economic Capital.
The Role of Data and Assumptions.
Managing across the Economic Cycle.
Stress Testing.
Validation of Models.
Modeling Credit Risk.
Modeling Market Risk.
Modeling Operational Risk.
Jump Diffusion and EVT.
Chapter 5: Managing Trade-Offs Between Risk and Reward.
The CEO Challenge.
Performance Measures.
Multi-Period Calculations.
Discounting Methods.
Capital Attribution and Allocation.
Applying Performance Measures.
Top-Down versus Bottom-Up.
Chapter 6: Understanding Your Appetite for Risk.
Identifying the Risk Appetite.
Risk Appetite and ICAAP.
Building the Risk Appetite Statement.
Managing the Risk Appetite (Process).
Governance and Risk Appetite.
The Living Will.
Chapter 7: Integrating Risk Management into Your Organization.
Embedding Risk Management.
What is ERM?
Culture.
Incentives and Compensation.
Your Organization.
Lines of Defense.
Reporting, Monitoring, and Decision-making.
Leveraging your Business Rhythm.
Planning, Budgeting, and Forecasting.
ERM and COSO.
Chapter 8: Leveraging Risk for Business Excellence.
More than Compliance.
Introducing the Customer Lifecycle.
Leveraging the Upside.
Managing the Downside.
Optimization.
Chapter 9: Basel II and the Future.
Basel II: What's It All about?
The Regulator Viewpoint.
Basel II Basics.
Special Challenges and Requirements.
Is It Worth It?
Beyond Basel II: Basel III and Regulatory Reform.
Solvency II.
Impacts on Financial Institutions and Financial Markets.
Non-bank Financial Institutions.
Too Big to Fail.
Afterword.
About the Author.
Index.
