Fundamentals of Enterprise Risk Management: How Top Companies Assess Risk, Manage Exposures, and Seize Opportunities

By John J. Hampton | Go to book overview

CHAPTER 1
MODERN RISK
MANAGEMENT

RISK QUOTE: More than at any other time in history, mankind
faces a crossroads. One path leads to despair and utter hopeless-
ness. The other to total extinction. Let us pray that we have the
wisdom to choose correctly
.

—WOODY ALLEN, WRITER/ACTOR/DIRECTOR/PRODUCER

RISK QUOTE: Better to remain silent and be thought a fool than to
speak out and remove all doubt
.

—ABRAHAM LINCOLN, U.S. PRESIDENT

In 1988, companies and managers began to discuss enterprise risk. A decision in one area can have major impact, for better or worse, on overall results, a possibility long recognized by economists, analysts, and managers. Stated differently, an optimal risk mitigation decision for a business unit may be suboptimal for the entity itself. After 1988, organizations began to take a holistic view of risk. This was a new development in companies and in the MBA programs that fed them future managers and leaders.

Prior to 1988, corporations often dealt with risk through a tactical analysis: We plan to move forward. We have some alternatives. Which one will be the best? When risk was introduced into the equation, the organization had to stretch a bit. What can derail

-3-

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