engleski

Risk Management: Strategies for Economic Development and Challenges in the Financial System

Effective risk management is considered to be a leading competitive advantage that determines the survival and success of the company in an uncertain global environment. The global financial crisis has focused attention to the proper identification, analysis and management of key corporate risks, as inadequate risk assessment and management have been identified as one of the main causes of a failure or financial difficulties of numerous organizations worldwide. Hence, inadequate risk management has become a problem of broader social interests, resulting in different regulatory actions like Troubled Asset Relief Program, The Federal Reserve guidance, new rules from the Securities and Exchange Commission as well as in recommendations of the OECD and the European Commission on the necessary changes in the existing risk management systems. As a result of regulatory actions and recommendations, an increasing number of companies are moving on from traditional silo-based risk management (TRM), where different corporate risks are managed on the individual basis by business unit managers with little or no oversight or communication of how management of particular risk affects corporate strategy and exposure to other corporate risks, toward ERM, which seeks to strategically consider the interactive effects of different risks with the goal of balancing between the dual nature of risk – offer effective protection from threats and seize the opportunities. Additionally, Standard & Poor's refined its ratings process in 2005 for financial institutions, in 2007 for insurance companies, and in 2008 for non-financial companies to incorporate ERM review. Rating agency considerations have brought ERM to the attention of the senior management and boards, encouraging broader implementation of enterprise risk management among companies around the World. The primary aim of ERM is to increase the likelihood that strategic objectives are realized and shareholders’ value is preserved and enhanced. However, by adopting a systematic and integrated approach to corporate risk management, ERM should improve corporate sustainability and lower firm’s overall risk of a failure, making positions for other stakeholders more secure and valuable. An increased awareness on the importance of integrated corporate risk management should result in a better corporate performance, corporate governance and corporate social responsibility, creating a successful and responsible organizations which add value, not only to their shareholders, but also to all stakeholders, society and consequently to the World’s economy. The edited book “Risk Management: Strategies for Economic Development and Challenges in the Financial System” presents 14 chapters which relate to different issues and challenges set in front of risk management systems, with an emphasis to the Enterprise Risk Management approach. The book analyses strategic risk management, the role of corporate governance in efficient management of risks, the role of the board in enterprise risk management, COSO’s ERM integrated framework, the role of the audit committee in the risk management process, the role of auditing in reducing the risk of a fraudulent financial reporting, contractual risks, the problem of a segmental financial reporting, the link between derivative usage and corporate hedging theories, credit default swaps and sovereign debt in Eurozone, contagiousness of financial crisis, parametric yield curve models used in valuation and risk management, impact of capital structure decisions on the systematic risk of common stocks, as well as the cases of risk management practices in agriculture and electric-power industry. The book is written for academics as well as for graduate and postgraduate students of Business and Economics with a special interest in Finance and Risk Management. However, to book should attract the attention of professionals who want to read the latest insights in the field of risk management, as the book is written also from the perspective of practical relevance, and should help managers in implementing an effective risk management strategy in their organization.

enterprise risk management ; corporate governance ; crisis ; audit committee ; derivatives

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