DR. JAMES L. DARROCH is currently CIT Chair in Financial Services, Schulich School of Business, York University and Associate Professor, Policy, Schulich School of Business, York University. James is a sought-after expert in strategy and financial services education. In 2017, James and his co-author Patricia Meredith won the distinguished Donner Prize (award for the best public policy book by a Canadian) for Stumbling Giants: Transforming Canada’s Banks for the Information Age.

DAVID WM. FINNIE is a senior corporate executive with over 20 years’ experience leading large and mid-sized multinationals and Fortune 100 companies in the building and optimization of their financial, capital, and risk management strategies and capabilities. In addition to risk management expertise, he also offers strengths as a strategic business leader helping to define and implement business growth strategies and drive new business development. David has published four short articles on risk management, governance, and strategy.

Preface: Risk is Good and Uncertainty is the Reality! xi

Acknowledgments xxv

About the Authors xxix

Chapter 1 Strategy and Risk: Two Sides of the Same Coin 1

Strategic Positioning and Risk 6

Strategy and Risk in a Start-Up 7

Chapter 2 Executing on the Plan and Discovering New Risks 17

The Assumption of Goal Congruence and the Importance of Culture 21

Conclusion 27

Chapter 3 Which Risks to Keep 31

Strategic Positioning and Risk Governance 38

How Does Risk Management Help Close the Gap Between Strategy Formulation and Execution? 40

Conclusion: Embracing and Managing Risk 42

Chapter 4 How Do We Achieve Independent Risk Governance and Improve Performance? 47

What Do We Mean by ERM? 51

Chapter 5 Who Has the Specific Knowledge to Design the Risk Architecture? Why You Need an Independent Risk Function 61

The Strategy-Risk-Governance Process 61

Meeting the Objective and the Categorization of Risks 69

The Risk Architecture 71

Creation of a Risk Function 73

Conclusion 76

Chapter 6 Enterprise Risk Management and Competitive Advantage 79

How Does Strategy Affect Randomness? 86

Chapter 7 What Reputation Do We Want? With Whom? 91

Managing Reputation Risk 99

Chapter 8 Uncertainty, Scenario Planning, and Real Options 105

Real Options 113

Conclusion 116

Chapter 9 Risk Culture and Ethics: Can You Have Excellence and Consistency at the Same Time? 121

The Advisor-Customer Encounter 124

Control Systems, Discretion, and Ethics 127

Culture, Ethics, Performance, and Risk Management 135

Chapter 10 The Top of the Pyramid: The CEO as Integrator of Strategy and Risk and the Board as the Fourth Line of Defense 141

The CEO: The Operational Integration of Strategy and Risk 145

The Board: The Governance Integration of Strategy and Risk 145

The Board Provides More Than Oversight 146

Epilogue: Decision-Making at the Restaurant: Creating and Executing a Risk-Aware Strategy 151

Appendix I: Risk Transformation and the Need for an Integrated Risk Approach 157

Appendix II: Resiliency 161

Bibliography 167

Index 183

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