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JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009

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Jp morgan private bank: risk management during the financial crisis 2008-2009 description.

Mary Erdoes, the CEO of JP Morgan's Asset Management business, and three colleagues provide insights into risk management issues faced by the firm's Private Bank during the financial crisis in 2008-2009. The case provides perspective on the philosophy with which they approach risk management, issues of greatest concern, tools and processes used in practice, the benefits and limitations of quantitative models and balance between the use of models and exercising judgment, and lessons learned from the crisis about risk management.

Case Description JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009

Strategic managment tools used in case study analysis of jp morgan private bank: risk management during the financial crisis 2008-2009, step 1. problem identification in jp morgan private bank: risk management during the financial crisis 2008-2009 case study, step 2. external environment analysis - pestel / pest / step analysis of jp morgan private bank: risk management during the financial crisis 2008-2009 case study, step 3. industry specific / porter five forces analysis of jp morgan private bank: risk management during the financial crisis 2008-2009 case study, step 4. evaluating alternatives / swot analysis of jp morgan private bank: risk management during the financial crisis 2008-2009 case study, step 5. porter value chain analysis / vrio / vrin analysis jp morgan private bank: risk management during the financial crisis 2008-2009 case study, step 6. recommendations jp morgan private bank: risk management during the financial crisis 2008-2009 case study, step 7. basis of recommendations for jp morgan private bank: risk management during the financial crisis 2008-2009 case study, quality & on time delivery.

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Case Analysis of JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009

JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009 is a Harvard Business (HBR) Case Study on Finance & Accounting , Texas Business School provides HBR case study assignment help for just $9. Texas Business School(TBS) case study solution is based on HBR Case Study Method framework, TBS expertise & global insights. JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009 is designed and drafted in a manner to allow the HBR case study reader to analyze a real-world problem by putting reader into the position of the decision maker. JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009 case study will help professionals, MBA, EMBA, and leaders to develop a broad and clear understanding of casecategory challenges. JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009 will also provide insight into areas such as – wordlist , strategy, leadership, sales and marketing, and negotiations.

Case Study Solutions Background Work

JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009 case study solution is focused on solving the strategic and operational challenges the protagonist of the case is facing. The challenges involve – evaluation of strategic options, key role of Finance & Accounting, leadership qualities of the protagonist, and dynamics of the external environment. The challenge in front of the protagonist, of JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009, is to not only build a competitive position of the organization but also to sustain it over a period of time.

Strategic Management Tools Used in Case Study Solution

The JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009 case study solution requires the MBA, EMBA, executive, professional to have a deep understanding of various strategic management tools such as SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis.

Texas Business School Approach to Finance & Accounting Solutions

In the Texas Business School, JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009 case study solution – following strategic tools are used - SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis. We have additionally used the concept of supply chain management and leadership framework to build a comprehensive case study solution for the case – JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009

Step 1 – Problem Identification of JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009 - Harvard Business School Case Study

The first step to solve HBR JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009 case study solution is to identify the problem present in the case. The problem statement of the case is provided in the beginning of the case where the protagonist is contemplating various options in the face of numerous challenges that Jp Risk is facing right now. Even though the problem statement is essentially – “Finance & Accounting” challenge but it has impacted by others factors such as communication in the organization, uncertainty in the external environment, leadership in Jp Risk, style of leadership and organization structure, marketing and sales, organizational behavior, strategy, internal politics, stakeholders priorities and more.

Step 2 – External Environment Analysis

Texas Business School approach of case study analysis – Conclusion, Reasons, Evidences - provides a framework to analyze every HBR case study. It requires conducting robust external environmental analysis to decipher evidences for the reasons presented in the JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009. The external environment analysis of JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009 will ensure that we are keeping a tab on the macro-environment factors that are directly and indirectly impacting the business of the firm.

What is PESTEL Analysis? Briefly Explained

PESTEL stands for political, economic, social, technological, environmental and legal factors that impact the external environment of firm in JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009 case study. PESTEL analysis of " JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009" can help us understand why the organization is performing badly, what are the factors in the external environment that are impacting the performance of the organization, and how the organization can either manage or mitigate the impact of these external factors.

How to do PESTEL / PEST / STEP Analysis? What are the components of PESTEL Analysis?

As mentioned above PESTEL Analysis has six elements – political, economic, social, technological, environmental, and legal. All the six elements are explained in context with JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009 macro-environment and how it impacts the businesses of the firm.

How to do PESTEL Analysis for JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009

To do comprehensive PESTEL analysis of case study – JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009 , we have researched numerous components under the six factors of PESTEL analysis.

Political Factors that Impact JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009

Political factors impact seven key decision making areas – economic environment, socio-cultural environment, rate of innovation & investment in research & development, environmental laws, legal requirements, and acceptance of new technologies.

Government policies have significant impact on the business environment of any country. The firm in “ JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009 ” needs to navigate these policy decisions to create either an edge for itself or reduce the negative impact of the policy as far as possible.

Data safety laws – The countries in which Jp Risk is operating, firms are required to store customer data within the premises of the country. Jp Risk needs to restructure its IT policies to accommodate these changes. In the EU countries, firms are required to make special provision for privacy issues and other laws.

Competition Regulations – Numerous countries have strong competition laws both regarding the monopoly conditions and day to day fair business practices. JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009 has numerous instances where the competition regulations aspects can be scrutinized.

Import restrictions on products – Before entering the new market, Jp Risk in case study JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009" should look into the import restrictions that may be present in the prospective market.

Export restrictions on products – Apart from direct product export restrictions in field of technology and agriculture, a number of countries also have capital controls. Jp Risk in case study “ JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009 ” should look into these export restrictions policies.

Foreign Direct Investment Policies – Government policies favors local companies over international policies, Jp Risk in case study “ JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009 ” should understand in minute details regarding the Foreign Direct Investment policies of the prospective market.

Corporate Taxes – The rate of taxes is often used by governments to lure foreign direct investments or increase domestic investment in a certain sector. Corporate taxation can be divided into two categories – taxes on profits and taxes on operations. Taxes on profits number is important for companies that already have a sustainable business model, while taxes on operations is far more significant for companies that are looking to set up new plants or operations.

Tariffs – Chekout how much tariffs the firm needs to pay in the “ JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009 ” case study. The level of tariffs will determine the viability of the business model that the firm is contemplating. If the tariffs are high then it will be extremely difficult to compete with the local competitors. But if the tariffs are between 5-10% then Jp Risk can compete against other competitors.

Research and Development Subsidies and Policies – Governments often provide tax breaks and other incentives for companies to innovate in various sectors of priority. Managers at JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009 case study have to assess whether their business can benefit from such government assistance and subsidies.

Consumer protection – Different countries have different consumer protection laws. Managers need to clarify not only the consumer protection laws in advance but also legal implications if the firm fails to meet any of them.

Political System and Its Implications – Different political systems have different approach to free market and entrepreneurship. Managers need to assess these factors even before entering the market.

Freedom of Press is critical for fair trade and transparency. Countries where freedom of press is not prevalent there are high chances of both political and commercial corruption.

Corruption level – Jp Risk needs to assess the level of corruptions both at the official level and at the market level, even before entering a new market. To tackle the menace of corruption – a firm should have a clear SOP that provides managers at each level what to do when they encounter instances of either systematic corruption or bureaucrats looking to take bribes from the firm.

Independence of judiciary – It is critical for fair business practices. If a country doesn’t have independent judiciary then there is no point entry into such a country for business.

Government attitude towards trade unions – Different political systems and government have different attitude towards trade unions and collective bargaining. The firm needs to assess – its comfort dealing with the unions and regulations regarding unions in a given market or industry. If both are on the same page then it makes sense to enter, otherwise it doesn’t.

Economic Factors that Impact JP Morgan Private Bank: Risk Management during the Financial Crisis 2008-2009

Social factors that impact jp morgan private bank: risk management during the financial crisis 2008-2009, technological factors that impact jp morgan private bank: risk management during the financial crisis 2008-2009, environmental factors that impact jp morgan private bank: risk management during the financial crisis 2008-2009, legal factors that impact jp morgan private bank: risk management during the financial crisis 2008-2009, step 3 – industry specific analysis, what is porter five forces analysis, step 4 – swot analysis / internal environment analysis, step 5 – porter value chain / vrio / vrin analysis, step 6 – evaluating alternatives & recommendations, step 7 – basis for recommendations, references :: jp morgan private bank: risk management during the financial crisis 2008-2009 case study solution.

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8 use cases for an efficient and effective risk management solution

Business risk is multi-dimensional, dynamic, and omnipresent, but you wouldn’t know it by the narrow capabilities of most risk management solutions. They tend to audit only for Sarbanes-Oxley (SOX) compliance reporting and other regulations, or “sample” a subset of data for security violations. They’re also typically bolt-on solutions that deliver flat reports instead of real-time, intelligence-driven analysis.

Even when the rest of an enterprise has modernized with real-time, collaborative cloud applications, the security, risk and audit functions can remain isolated—using outdated technology that perpetuates audit misses, time lags in identifying and mitigating risks, and gaps in insights. Some companies may have deployed integrated risk management (IRM) solutions, which is step up from the legacy focus on compliance, but can be misleading. IRM solutions try to provide an integrated view of how well an organization manages risk, but they’re typically bolt-on solutions themselves, and thus not integrated with an organization’s most critical business applications. This gives a false sense of security and keeps risk standalone, preventing the adoption of a risk-intelligent culture.

Oracle Risk Management and Compliance is very different. Purpose-built as a native solution for Oracle Fusion Cloud applications, it comprehensively and continuously monitors and informs on risk activity for eight key use cases:

ERP Key Use Cases

• Optimize security design to minimize separation of duties (SOD) risk
• Automate SOD controls for compliance reporting
• Digitize user access certification workflows
• Automate monitoring of user security
• Automate monitoring of changes to critical configurations
• Automate monitoring of financial transactions
• Digitize audit and SOX compliance workflows
• Digitize risk (ERM) and continuity (BMC) workflows

You can read in-depth about each use case in our paper, “ Automate ERP Cloud Security and Internal Controls .”  Let’s look at why these use cases are important to your business. 

Efficient and effective risk management

Oracle Risk Management lets organizations automate many routine, labor-intensive tasks that support assurance, compliance, security, and fraud prevention.  For example, it helps streamline SOX compliance by eliminating spreadsheet and email-based tasks, approve user access to sensitive data, identify duplicate invoices, among other capabilities.

Automation and digitization of security, risk and audit functions is integral for efficiency, but a game-changing risk management solution should also be effective at continually improving financial controls, stopping cash leaks, errors, and fraud, and reducing audit expenses.  This can only be achieved by using advanced technology like artificial intelligence (AI).  

The power of AI-driven monitoring and analysis

Oracle Risk Management brings AI-driven analysis and monitoring to security, risk, and audit. Benefits include:

• Built-in monitoring and analysis in critical ERP business processes:  Bolt-on risk management solutions require data to be extracted from an organization’s most critical application—its ERP—for security, risk, and audit analysis. This increases, not decreases, security vulnerabilities. These solutions can compromise data integrity and create lag-times in identifying potentially damaging situations. Data extractions are not only time-consuming, but reactive, providing an incomplete assessment of risk. Oracle’s approach is ground-breaking because it keeps risk management data and transactional ERP data in one place. As a result, you can use ongoing analysis to continuously improve risk posture and more confidently manage changes in markets, regulations, and workforce or business disruptions.  
• Continuous, real time monitoring: The volume of data that organizations must consume and analyze continues to grow at unprecedented rates. Advanced technology like AI is required for risk identification and mitigation; without the advantages of AI-driven continuous monitoring and analysis, security, risk and audit functions become over-extended. This increases the chance of mistakes, and makes it difficult to use the data to help drive risk-based actions or decisions. Periodic analysis covers only a sampling of finance transactions, so it can be easy to miss a simple mistake—or purposeful fraud—among the thousands upon thousands of transactions your company generates daily. And when an audit does uncover an issue, it could be long after the damage is done, making the problem more time-consuming and costly.  With Oracle Risk Management and Compliance, organizations can audit 100% of their ERP transactions and configurations, enforce SOD to prevent external audit failures, and prevent unauthorized access to critical ERP processes. And, business process owners can review a dashboard at any time to see real-time information about user activity, and get alerts about potential issues, such as frequent changes made to supplier bank accounts.  As a result, an organization’s approach to risk management becomes proactive—not reactive—helping to identify potential risks at points of origins for immediate awareness and coordinated response. 

Build resilience with a complete risk solution

Oracle Risk Management and Oracle Cloud ERP are part of an integrated platform of cloud applications. When used together, you’ll always have a standardized, right-sized risk management strategy so you can prevail over change with confidence—knowing that a business change or an unforeseen disruption like a pandemic will not compromise your security or the financial integrity of your company.  This turns risk management into an enabler of change, whether that’s growth through M&A, launching a new product, or reconfiguring your ERP to support subscription business models.

Read our starter kit to learn best practices and take the first steps.

Head of finance and risk product marketing, cloud erp, oracle.

Business risk is multi-dimensional, dynamic, and omnipresent, but you wouldn’t know it by the narrow capabilities of most risk management solutions. They tend to audit only for Sarbanes-Oxley (SOX) compliance reporting and other regulations, or “sample” a subset of data for security violations. They’re also typically bolt-on solutions that deliver flat reports instead of real-time, intelligence-driven analysis.

Even when the rest of an enterprise has modernized with real-time, collaborative cloud applications, the security, risk and audit functions can remain isolated—using outdated technology that perpetuates audit misses, time lags in identifying and mitigating risks, and gaps in insights. Some companies may have deployed integrated risk management (IRM) solutions, which is step up from the legacy focus on compliance, but can be misleading. IRM solutions try to provide an integrated view of how well an organization manages risk, but they’re typically bolt-on solutions themselves, and thus not integrated with an organization’s most critical business applications. This gives a false sense of security and keeps risk standalone, preventing the adoption of a risk-intelligent culture.

You can read in-depth about each use case in our paper, “ Automate ERP Cloud Security and Internal Controls .”  Let’s look at why these use cases are important to your business. 

Oracle Risk Management lets organizations automate many routine, labor-intensive tasks that support assurance, compliance, security, and fraud prevention.  For example, it helps streamline SOX compliance by eliminating spreadsheet and email-based tasks, approve user access to sensitive data, identify duplicate invoices, among other capabilities.

Automation and digitization of security, risk and audit functions is integral for efficiency, but a game-changing risk management solution should also be effective at continually improving financial controls, stopping cash leaks, errors, and fraud, and reducing audit expenses.  This can only be achieved by using advanced technology like artificial intelligence (AI).  

• Built-in monitoring and analysis in critical ERP business processes:  Bolt-on risk management solutions require data to be extracted from an organization’s most critical application—its ERP—for security, risk, and audit analysis. This increases, not decreases, security vulnerabilities. These solutions can compromise data integrity and create lag-times in identifying potentially damaging situations. Data extractions are not only time-consuming, but reactive, providing an incomplete assessment of risk. Oracle’s approach is ground-breaking because it keeps risk management data and transactional ERP data in one place. As a result, you can use ongoing analysis to continuously improve risk posture and more confidently manage changes in markets, regulations, and workforce or business disruptions.  
• Continuous, real time monitoring: The volume of data that organizations must consume and analyze continues to grow at unprecedented rates. Advanced technology like AI is required for risk identification and mitigation; without the advantages of AI-driven continuous monitoring and analysis, security, risk and audit functions become over-extended. This increases the chance of mistakes, and makes it difficult to use the data to help drive risk-based actions or decisions. Periodic analysis covers only a sampling of finance transactions, so it can be easy to miss a simple mistake—or purposeful fraud—among the thousands upon thousands of transactions your company generates daily. And when an audit does uncover an issue, it could be long after the damage is done, making the problem more time-consuming and costly.  With Oracle Risk Management and Compliance, organizations can audit 100% of their ERP transactions and configurations, enforce SOD to prevent external audit failures, and prevent unauthorized access to critical ERP processes. And, business process owners can review a dashboard at any time to see real-time information about user activity, and get alerts about potential issues, such as frequent changes made to supplier bank accounts.  As a result, an organization’s approach to risk management becomes proactive—not reactive—helping to identify potential risks at points of origins for immediate awareness and coordinated response. 

Oracle Risk Management and Oracle Cloud ERP are part of an integrated platform of cloud applications. When used together, you’ll always have a standardized, right-sized risk management strategy so you can prevail over change with confidence—knowing that a business change or an unforeseen disruption like a pandemic will not compromise your security or the financial integrity of your company.  This turns risk management into an enabler of change, whether that’s growth through M&A, launching a new product, or reconfiguring your ERP to support subscription business models.

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Enterprise Risk Management Case Studies: Heroes and Zeros

By Andy Marker | April 7, 2021

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We’ve compiled more than 20 case studies of enterprise risk management programs that illustrate how companies can prevent significant losses yet take risks with more confidence.   

Included on this page, you’ll find case studies and examples by industry , case studies of major risk scenarios (and company responses), and examples of ERM successes and failures .

Enterprise Risk Management Examples and Case Studies

With enterprise risk management (ERM) , companies assess potential risks that could derail strategic objectives and implement measures to minimize or avoid those risks. You can analyze examples (or case studies) of enterprise risk management to better understand the concept and how to properly execute it.

The collection of examples and case studies on this page illustrates common risk management scenarios by industry, principle, and degree of success. For a basic overview of enterprise risk management, including major types of risks, how to develop policies, and how to identify key risk indicators (KRIs), read “ Enterprise Risk Management 101: Programs, Frameworks, and Advice from Experts .”

Enterprise Risk Management Framework Examples

An enterprise risk management framework is a system by which you assess and mitigate potential risks. The framework varies by industry, but most include roles and responsibilities, a methodology for risk identification, a risk appetite statement, risk prioritization, mitigation strategies, and monitoring and reporting.

To learn more about enterprise risk management and find examples of different frameworks, read our “ Ultimate Guide to Enterprise Risk Management .”

Enterprise Risk Management Examples and Case Studies by Industry

Though every firm faces unique risks, those in the same industry often share similar risks. By understanding industry-wide common risks, you can create and implement response plans that offer your firm a competitive advantage.

Enterprise Risk Management Example in Banking

Toronto-headquartered TD Bank organizes its risk management around two pillars: a risk management framework and risk appetite statement. The enterprise risk framework defines the risks the bank faces and lays out risk management practices to identify, assess, and control risk. The risk appetite statement outlines the bank’s willingness to take on risk to achieve its growth objectives. Both pillars are overseen by the risk committee of the company’s board of directors.  

Risk management frameworks were an important part of the International Organization for Standardization’s 31000 standard when it was first written in 2009 and have been updated since then. The standards provide universal guidelines for risk management programs.  

Risk management frameworks also resulted from the efforts of the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The group was formed to fight corporate fraud and included risk management as a dimension. 

Once TD completes the ERM framework, the bank moves onto the risk appetite statement. 

The bank, which built a large U.S. presence through major acquisitions, determined that it will only take on risks that meet the following three criteria:

• The risk fits the company’s strategy, and TD can understand and manage those risks. 
• The risk does not render the bank vulnerable to significant loss from a single risk.
• The risk does not expose the company to potential harm to its brand and reputation. 

Some of the major risks the bank faces include strategic risk, credit risk, market risk, liquidity risk, operational risk, insurance risk, capital adequacy risk, regulator risk, and reputation risk. Managers detail these categories in a risk inventory. 

The risk framework and appetite statement, which are tracked on a dashboard against metrics such as capital adequacy and credit risk, are reviewed annually. 

TD uses a three lines of defense (3LOD) strategy, an approach widely favored by ERM experts, to guard against risk. The three lines are as follows:

• A business unit and corporate policies that create controls, as well as manage and monitor risk
• Standards and governance that provide oversight and review of risks and compliance with the risk appetite and framework 
• Internal audits that provide independent checks and verification that risk-management procedures are effective

Enterprise Risk Management Example in Pharmaceuticals

Drug companies’ risks include threats around product quality and safety, regulatory action, and consumer trust. To avoid these risks, ERM experts emphasize the importance of making sure that strategic goals do not conflict. 

For Britain’s GlaxoSmithKline, such a conflict led to a breakdown in risk management, among other issues. In the early 2000s, the company was striving to increase sales and profitability while also ensuring safe and effective medicines. One risk the company faced was a failure to meet current good manufacturing practices (CGMP) at its plant in Cidra, Puerto Rico. 

CGMP includes implementing oversight and controls of manufacturing, as well as managing the risk and confirming the safety of raw materials and finished drug products. Noncompliance with CGMP can result in escalating consequences, ranging from warnings to recalls to criminal prosecution. 

GSK’s unit pleaded guilty and paid $750 million in 2010 to resolve U.S. charges related to drugs made at the Cidra plant, which the company later closed. A fired GSK quality manager alerted regulators and filed a whistleblower lawsuit in 2004. In announcing the consent decree, the U.S. Department of Justice said the plant had a history of bacterial contamination and multiple drugs created there in the early 2000s violated safety standards.

According to the whistleblower, GSK’s ERM process failed in several respects to act on signs of non-compliance with CGMP. The company received warning letters from the U.S. Food and Drug Administration in 2001 about the plant’s practices, but did not resolve the issues. 

Additionally, the company didn’t act on the quality manager’s compliance report, which advised GSK to close the plant for two weeks to fix the problems and notify the FDA. According to court filings, plant staff merely skimmed rejected products and sold them on the black market. They also scraped by hand the inside of an antibiotic tank to get more product and, in so doing, introduced bacteria into the product.

Enterprise Risk Management Example in Consumer Packaged Goods

Mars Inc., an international candy and food company, developed an ERM process. The company piloted and deployed the initiative through workshops with geographic, product, and functional teams from 2003 to 2012. 

Driven by a desire to frame risk as an opportunity and to work within the company’s decentralized structure, Mars created a process that asked participants to identify potential risks and vote on which had the highest probability. The teams listed risk mitigation steps, then ranked and color-coded them according to probability of success. 

Larry Warner, a Mars risk officer at the time, illustrated this process in a case study . An initiative to increase direct-to-consumer shipments by 12 percent was colored green, indicating a 75 percent or greater probability of achievement. The initiative to bring a new plant online by the end of Q3 was coded red, meaning less than a 50 percent probability of success. 

The company’s results were hurt by a surprise at an operating unit that resulted from a so-coded red risk identified in a unit workshop. Executives had agreed that some red risk profile was to be expected, but they decided that when a unit encountered a red issue, it must be communicated upward when first identified. This became a rule. 

This process led to the creation of an ERM dashboard that listed initiatives in priority order, with the profile of each risk faced in the quarter, the risk profile trend, and a comment column for a year-end view. 

According to Warner, the key factors of success for ERM at Mars are as follows:

• The initiative focused on achieving operational and strategic objectives rather than compliance, which refers to adhering to established rules and regulations.
• The program evolved, often based on requests from business units, and incorporated continuous improvement. 
• The ERM team did not overpromise. It set realistic objectives.
• The ERM team periodically surveyed business units, management teams, and board advisers.

Enterprise Risk Management Example in Retail

Walmart is the world’s biggest retailer. As such, the company understands that its risk makeup is complex, given the geographic spread of its operations and its large number of stores, vast supply chain, and high profile as an employer and buyer of goods. 

In the 1990s, the company sought a simplified strategy for assessing risk and created an enterprise risk management plan with five steps founded on these four questions:

• What are the risks?
• What are we going to do about them?
• How will we know if we are raising or decreasing risk?
• How will we show shareholder value?

The process follows these five steps:

• Risk Identification: Senior Walmart leaders meet in workshops to identify risks, which are then plotted on a graph of probability vs. impact. Doing so helps to prioritize the biggest risks. The executives then look at seven risk categories (both internal and external): legal/regulatory, political, business environment, strategic, operational, financial, and integrity. Many ERM pros use risk registers to evaluate and determine the priority of risks. You can download templates that help correlate risk probability and potential impact in “ Free Risk Register Templates .”
• Risk Mitigation: Teams that include operational staff in the relevant area meet. They use existing inventory procedures to address the risks and determine if the procedures are effective.
• Action Planning: A project team identifies and implements next steps over the several months to follow.
• Performance Metrics: The group develops metrics to measure the impact of the changes. They also look at trends of actual performance compared to goal over time.
• Return on Investment and Shareholder Value: In this step, the group assesses the changes’ impact on sales and expenses to determine if the moves improved shareholder value and ROI.

To develop your own risk management planning, you can download a customizable template in “ Risk Management Plan Templates .”

Enterprise Risk Management Example in Agriculture

United Grain Growers (UGG), a Canadian grain distributor that now is part of Glencore Ltd., was hailed as an ERM innovator and became the subject of business school case studies for its enterprise risk management program. This initiative addressed the risks associated with weather for its business. Crop volume drove UGG’s revenue and profits. 

In the late 1990s, UGG identified its major unaddressed risks. Using almost a century of data, risk analysts found that extreme weather events occurred 10 times as frequently as previously believed. The company worked with its insurance broker and the Swiss Re Group on a solution that added grain-volume risk (resulting from weather fluctuations) to its other insured risks, such as property and liability, in an integrated program. 

The result was insurance that protected grain-handling earnings, which comprised half of UGG’s gross profits. The greater financial stability significantly enhanced the firm’s ability to achieve its strategic objectives. 

Since then, the number and types of instruments to manage weather-related risks has multiplied rapidly. For example, over-the-counter derivatives, such as futures and options, began trading in 1997. The Chicago Mercantile Exchange now offers weather futures contracts on 12 U.S. and international cities. 

Weather derivatives are linked to climate factors such as rainfall or temperature, and they hedge different kinds of risks than do insurance. These risks are much more common (e.g., a cooler-than-normal summer) than the earthquakes and floods that insurance typically covers. And the holders of derivatives do not have to incur any damage to collect on them.

These weather-linked instruments have found a wider audience than anticipated, including retailers that worry about freak storms decimating Christmas sales, amusement park operators fearing rainy summers will keep crowds away, and energy companies needing to hedge demand for heating and cooling.

This area of ERM continues to evolve because weather and crop insurance are not enough to address all the risks that agriculture faces. Arbol, Inc. estimates that more than $1 trillion of agricultural risk is uninsured. As such, it is launching a blockchain-based platform that offers contracts (customized by location and risk parameters) with payouts based on weather data. These contracts can cover risks associated with niche crops and small growing areas.

Enterprise Risk Management Example in Insurance

Switzerland’s Zurich Insurance Group understands that risk is inherent for insurers and seeks to practice disciplined risk-taking, within a predetermined risk tolerance. 

The global insurer’s enterprise risk management framework aims to protect capital, liquidity, earnings, and reputation. Governance serves as the basis for risk management, and the framework lays out responsibilities for taking, managing, monitoring, and reporting risks. 

The company uses a proprietary process called Total Risk Profiling (TRP) to monitor internal and external risks to its strategy and financial plan. TRP assesses risk on the basis of severity and probability, and helps define and implement mitigating moves. 

Zurich’s risk appetite sets parameters for its tolerance within the goal of maintaining enough capital to achieve an AA rating from rating agencies. For this, the company uses its own Zurich economic capital model, referred to as Z-ECM. The model quantifies risk tolerance with a metric that assesses risk profile vs. risk tolerance. 

To maintain the AA rating, the company aims to hold capital between 100 and 120 percent of capital at risk. Above 140 percent is considered overcapitalized (therefore at risk of throttling growth), and under 90 percent is below risk tolerance (meaning the risk is too high). On either side of 100 to 120 percent (90 to 100 percent and 120 to 140 percent), the insurer considers taking mitigating action. 

Zurich’s assessment of risk and the nature of those risks play a major role in determining how much capital regulators require the business to hold. A popular tool to assess risk is the risk matrix, and you can find a variety of templates in “ Free, Customizable Risk Matrix Templates .”

In 2020, Zurich found that its biggest exposures were market risk, such as falling asset valuations and interest-rate risk; insurance risk, such as big payouts for covered customer losses, which it hedges through diversification and reinsurance; credit risk in assets it holds and receivables; and operational risks, such as internal process failures and external fraud.

Enterprise Risk Management Example in Technology

Financial software maker Intuit has strengthened its enterprise risk management through evolution, according to a case study by former Chief Risk Officer Janet Nasburg. 

The program is founded on the following five core principles:

• Use a common risk framework across the enterprise.
• Assess risks on an ongoing basis.
• Focus on the most important risks.
• Clearly define accountability for risk management.
• Commit to continuous improvement of performance measurement and monitoring. 

ERM programs grow according to a maturity model, and as capability rises, the shareholder value from risk management becomes more visible and important. 

The maturity phases include the following:

• Ad hoc risk management addresses a specific problem when it arises.
• Targeted or initial risk management approaches risks with multiple understandings of what constitutes risk and management occurs in silos. 
• Integrated or repeatable risk management puts in place an organization-wide framework for risk assessment and response. 
• Intelligent or managed risk management coordinates risk management across the business, using common tools. 
• Risk leadership incorporates risk management into strategic decision-making. 

Intuit emphasizes using key risk indicators (KRIs) to understand risks, along with key performance indicators (KPIs) to gauge the effectiveness of risk management. 

Early in its ERM journey, Intuit measured performance on risk management process participation and risk assessment impact. For participation, the targeted rate was 80 percent of executive management and business-line leaders. This helped benchmark risk awareness and current risk management, at a time when ERM at the company was not mature.

Conduct an annual risk assessment at corporate and business-line levels to plot risks, so the most likely and most impactful risks are graphed in the upper-right quadrant. Doing so focuses attention on these risks and helps business leaders understand the risk’s impact on performance toward strategic objectives. 

In the company’s second phase of ERM, Intuit turned its attention to building risk management capacity and sought to ensure that risk management activities addressed the most important risks. The company evaluated performance using color-coded status symbols (red, yellow, green) to indicate risk trend and progress on risk mitigation measures.

In its third phase, Intuit moved to actively monitoring the most important risks and ensuring that leaders modified their strategies to manage risks and take advantage of opportunities. An executive dashboard uses KRIs, KPIs, an overall risk rating, and red-yellow-green coding. The board of directors regularly reviews this dashboard.

Over this evolution, the company has moved from narrow, tactical risk management to holistic, strategic, and long-term ERM.

Enterprise Risk Management Case Studies by Principle

ERM veterans agree that in addition to KPIs and KRIs, other principles are equally important to follow. Below, you’ll find examples of enterprise risk management programs by principles.

ERM Principle #1: Make Sure Your Program Aligns with Your Values

Raytheon Case Study U.S. defense contractor Raytheon states that its highest priority is delivering on its commitment to provide ethical business practices and abide by anti-corruption laws.

Raytheon backs up this statement through its ERM program. Among other measures, the company performs an annual risk assessment for each function, including the anti-corruption group under the Chief Ethics and Compliance Officer. In addition, Raytheon asks 70 of its sites to perform an anti-corruption self-assessment each year to identify gaps and risks. From there, a compliance team tracks improvement actions. 

Every quarter, the company surveys 600 staff members who may face higher anti-corruption risks, such as the potential for bribes. The survey asks them to report any potential issues in the past quarter.

Also on a quarterly basis, the finance and internal controls teams review higher-risk profile payments, such as donations and gratuities to confirm accuracy and compliance. Oversight and compliance teams add other checks, and they update a risk-based audit plan continuously.

ERM Principle #2: Embrace Diversity to Reduce Risk

State Street Global Advisors Case Study In 2016, the asset management firm State Street Global Advisors introduced measures to increase gender diversity in its leadership as a way of reducing portfolio risk, among other goals. 

The company relied on research that showed that companies with more women senior managers had a better return on equity, reduced volatility, and fewer governance problems such as corruption and fraud. 

Among the initiatives was a campaign to influence companies where State Street had invested, in order to increase female membership on their boards. State Street also developed an investment product that tracks the performance of companies with the highest level of senior female leadership relative to peers in their sector. 

In 2020, the company announced some of the results of its effort. Among the 1,384 companies targeted by the firm, 681 added at least one female director.

ERM Principle #3: Do Not Overlook Resource Risks

Infosys Case Study India-based technology consulting company Infosys, which employees more than 240,000 people, has long recognized the risk of water shortages to its operations. 

India’s rapidly growing population and development has increased the risk of water scarcity. A 2020 report by the World Wide Fund for Nature said 30 cities in India faced the risk of severe water scarcity over the next three decades. 

Infosys has dozens of facilities in India and considers water to be a significant short-term risk. At its campuses, the company uses the water for cooking, drinking, cleaning, restrooms, landscaping, and cooling. Water shortages could halt Infosys operations and prevent it from completing customer projects and reaching its performance objectives. 

In an enterprise risk assessment example, Infosys’ ERM team conducts corporate water-risk assessments while sustainability teams produce detailed water-risk assessments for individual locations, according to a report by the World Business Council for Sustainable Development .

The company uses the COSO ERM framework to respond to the risks and decide whether to accept, avoid, reduce, or share these risks. The company uses root-cause analysis (which focuses on identifying underlying causes rather than symptoms) and the site assessments to plan steps to reduce risks. 

Infosys has implemented various water conservation measures, such as water-efficient fixtures and water recycling, rainwater collection and use, recharging aquifers, underground reservoirs to hold five days of water supply at locations, and smart-meter usage monitoring. Infosys’ ERM team tracks metrics for per-capita water consumption, along with rainfall data, availability and cost of water by tanker trucks, and water usage from external suppliers. 

In the 2020 fiscal year, the company reported a nearly 64 percent drop in per-capita water consumption by its workforce from the 2008 fiscal year. 

The business advantages of this risk management include an ability to open locations where water shortages may preclude competitors, and being able to maintain operations during water scarcity, protecting profitability.

ERM Principle #4: Fight Silos for Stronger Enterprise Risk Management

U.S. Government Case Study The terrorist attacks of September 11, 2001, revealed that the U.S. government’s then-current approach to managing intelligence was not adequate to address the threats — and, by extension, so was the government’s risk management procedure. Since the Cold War, sensitive information had been managed on a “need to know” basis that resulted in data silos. 

In the case of 9/11, this meant that different parts of the government knew some relevant intelligence that could have helped prevent the attacks. But no one had the opportunity to put the information together and see the whole picture. A congressional commission determined there were 10 lost operational opportunities to derail the plot. Silos existed between law enforcement and intelligence, as well as between and within agencies. 

After the attacks, the government moved toward greater information sharing and collaboration. Based on a task force’s recommendations, data moved from a centralized network to a distributed model, and social networking tools now allow colleagues throughout the government to connect. Staff began working across agency lines more often.

Enterprise Risk Management Examples by Scenario

While some scenarios are too unlikely to receive high-priority status, low-probability risks are still worth running through the ERM process. Robust risk management creates a culture and response capacity that better positions a company to deal with a crisis.

In the following enterprise risk examples, you will find scenarios and details of how organizations manage the risks they face.

Scenario: ERM and the Global Pandemic While most businesses do not have the resources to do in-depth ERM planning for the rare occurrence of a global pandemic, companies with a risk-aware culture will be at an advantage if a pandemic does hit. 

These businesses already have processes in place to escalate trouble signs for immediate attention and an ERM team or leader monitoring the threat environment. A strong ERM function gives clear and effective guidance that helps the company respond.

A report by Vodafone found that companies identified as “future ready” fared better in the COVID-19 pandemic. The attributes of future-ready businesses have a lot in common with those of companies that excel at ERM. These include viewing change as an opportunity; having detailed business strategies that are documented, funded, and measured; working to understand the forces that shape their environments; having roadmaps in place for technological transformation; and being able to react more quickly than competitors. 

Only about 20 percent of companies in the Vodafone study met the definition of “future ready.” But 54 percent of these firms had a fully developed and tested business continuity plan, compared to 30 percent of all businesses. And 82 percent felt their continuity plans worked well during the COVID-19 crisis. Nearly 50 percent of all businesses reported decreased profits, while 30 percent of future-ready organizations saw profits rise. 

Scenario: ERM and the Economic Crisis  The 2008 economic crisis in the United States resulted from the domino effect of rising interest rates, a collapse in housing prices, and a dramatic increase in foreclosures among mortgage borrowers with poor creditworthiness. This led to bank failures, a credit crunch, and layoffs, and the U.S. government had to rescue banks and other financial institutions to stabilize the financial system.

Some commentators said these events revealed the shortcomings of ERM because it did not prevent the banks’ mistakes or collapse. But Sim Segal, an ERM consultant and director of Columbia University’s ERM master’s degree program, analyzed how banks performed on 10 key ERM criteria. 

Segal says a risk-management program that incorporates all 10 criteria has these characteristics: 

• Risk management has an enterprise-wide scope.
• The program includes all risk categories: financial, operational, and strategic. 
• The focus is on the most important risks, not all possible risks. 
• Risk management is integrated across risk types.
• Aggregated metrics show risk exposure and appetite across the enterprise.
• Risk management incorporates decision-making, not just reporting.
• The effort balances risk and return management.
• There is a process for disclosure of risk.
• The program measures risk in terms of potential impact on company value.
• The focus of risk management is on the primary stakeholder, such as shareholders, rather than regulators or rating agencies.

In his book Corporate Value of Enterprise Risk Management , Segal concluded that most banks did not actually use ERM practices, which contributed to the financial crisis. He scored banks as failing on nine of the 10 criteria, only giving them a passing grade for focusing on the most important risks. 

Scenario: ERM and Technology Risk  The story of retailer Target’s failed expansion to Canada, where it shut down 133 loss-making stores in 2015, has been well documented. But one dimension that analysts have sometimes overlooked was Target’s handling of technology risk. 

A case study by Canadian Business magazine traced some of the biggest issues to software and data-quality problems that dramatically undermined the Canadian launch. 

As with other forms of ERM, technology risk management requires companies to ask what could go wrong, what the consequences would be, how they might prevent the risks, and how they should deal with the consequences. 

But with its technology plan for Canada, Target did not heed risk warning signs. 

In the United States, Target had custom systems for ordering products from vendors, processing items at warehouses, and distributing merchandise to stores quickly. But that software would need customization to work with the Canadian dollar, metric system, and French-language characters. 

Target decided to go with new ERP software on an aggressive two-year timeline. As Target began ordering products for the Canadian stores in 2012, problems arose. Some items did not fit into shipping containers or on store shelves, and information needed for customs agents to clear imported items was not correct in Target's system. 

Target found that its supply chain software data was full of errors. Product dimensions were in inches, not centimeters; height and width measurements were mixed up. An internal investigation showed that only about 30 percent of the data was accurate. 

In an attempt to fix these errors, Target merchandisers spent a week double-checking with vendors up to 80 data points for each of the retailer’s 75,000 products. They discovered that the dummy data entered into the software during setup had not been altered. To make any corrections, employees had to send the new information to an office in India where staff would enter it into the system. 

As the launch approached, the technology errors left the company vulnerable to stockouts, few people understood how the system worked, and the point-of-sale checkout system did not function correctly. Soon after stores opened in 2013, consumers began complaining about empty shelves. Meanwhile, Target Canada distribution centers overflowed due to excess ordering based on poor data fed into forecasting software. 

The rushed launch compounded problems because it did not allow the company enough time to find solutions or alternative technology. While the retailer fixed some issues by the end of 2014, it was too late. Target Canada filed for bankruptcy protection in early 2015. 

Scenario: ERM and Cybersecurity System hacks and data theft are major worries for companies. But as a relatively new field, cyber-risk management faces unique hurdles.

For example, risk managers and information security officers have difficulty quantifying the likelihood and business impact of a cybersecurity attack. The rise of cloud-based software exposes companies to third-party risks that make these projections even more difficult to calculate. 

As the field evolves, risk managers say it’s important for IT security officers to look beyond technical issues, such as the need to patch a vulnerability, and instead look more broadly at business impacts to make a cost benefit analysis of risk mitigation. Frameworks such as the Risk Management Framework for Information Systems and Organizations by the National Institute of Standards and Technology can help.  

Health insurer Aetna considers cybersecurity threats as a part of operational risk within its ERM framework and calculates a daily risk score, adjusted with changes in the cyberthreat landscape. 

Aetna studies threats from external actors by working through information sharing and analysis centers for the financial services and health industries. Aetna staff reverse-engineers malware to determine controls. The company says this type of activity helps ensure the resiliency of its business processes and greatly improves its ability to help protect member information.

For internal threats, Aetna uses models that compare current user behavior to past behavior and identify anomalies. (The company says it was the first organization to do this at scale across the enterprise.) Aetna gives staff permissions to networks and data based on what they need to perform their job. This segmentation restricts access to raw data and strengthens governance. 

Another risk initiative scans outgoing employee emails for code patterns, such as credit card or Social Security numbers. The system flags the email, and a security officer assesses it before the email is released.

Examples of Poor Enterprise Risk Management

Case studies of failed enterprise risk management often highlight mistakes that managers could and should have spotted — and corrected — before a full-blown crisis erupted. The focus of these examples is often on determining why that did not happen. 

ERM Case Study: General Motors

In 2014, General Motors recalled the first of what would become 29 million cars due to faulty ignition switches and paid compensation for 124 related deaths. GM knew of the problem for at least 10 years but did not act, the automaker later acknowledged. The company entered a deferred prosecution agreement and paid a $900 million penalty. 

Pointing to the length of time the company failed to disclose the safety problem, ERM specialists say it shows the problem did not reside with a single department. “Rather, it reflects a failure to properly manage risk,” wrote Steve Minsky, a writer on ERM and CEO of an ERM software company, in Risk Management magazine. 

“ERM is designed to keep all parties across the organization, from the front lines to the board to regulators, apprised of these kinds of problems as they become evident. Unfortunately, GM failed to implement such a program, ultimately leading to a tragic and costly scandal,” Minsky said.

Also in the auto sector, an enterprise risk management case study of Toyota looked at its problems with unintended acceleration of vehicles from 2002 to 2009. Several studies, including a case study by Carnegie Mellon University Professor Phil Koopman , blamed poor software design and company culture. A whistleblower later revealed a coverup by Toyota. The company paid more than $2.5 billion in fines and settlements.

ERM Case Study: Lululemon

In 2013, following customer complaints that its black yoga pants were too sheer, the athletic apparel maker recalled 17 percent of its inventory at a cost of $67 million. The company had previously identified risks related to fabric supply and quality. The CEO said the issue was inadequate testing. 

Analysts raised concerns about the company’s controls, including oversight of factories and product quality. A case study by Stanford University professors noted that Lululemon’s episode illustrated a common disconnect between identifying risks and being prepared to manage them when they materialize. Lululemon’s reporting and analysis of risks was also inadequate, especially as related to social media. In addition, the case study highlighted the need for a system to escalate risk-related issues to the board. 

ERM Case Study: Kodak 

Once an iconic brand, the photo film company failed for decades to act on the threat that digital photography posed to its business and eventually filed for bankruptcy in 2012. The company’s own research in 1981 found that digital photos could ultimately replace Kodak’s film technology and estimated it had 10 years to prepare. 

Unfortunately, Kodak did not prepare and stayed locked into the film paradigm. The board reinforced this course when in 1989 it chose as CEO a candidate who came from the film business over an executive interested in digital technology. 

Had the company acknowledged the risks and employed ERM strategies, it might have pursued a variety of strategies to remain successful. The company’s rival, Fuji Film, took the money it made from film and invested in new initiatives, some of which paid off. Kodak, on the other hand, kept investing in the old core business.

Case Studies of Successful Enterprise Risk Management

Successful enterprise risk management usually requires strong performance in multiple dimensions, and is therefore more likely to occur in organizations where ERM has matured. The following examples of enterprise risk management can be considered success stories. 

ERM Case Study: Statoil 

A major global oil producer, Statoil of Norway stands out for the way it practices ERM by looking at both downside risk and upside potential. Taking risks is vital in a business that depends on finding new oil reserves. 

According to a case study, the company developed its own framework founded on two basic goals: creating value and avoiding accidents.

The company aims to understand risks thoroughly, and unlike many ERM programs, Statoil maps risks on both the downside and upside. It graphs risk on probability vs. impact on pre-tax earnings, and it examines each risk from both positive and negative perspectives. 

For example, the case study cites a risk that the company assessed as having a 5 percent probability of a somewhat better-than-expected outcome but a 10 percent probability of a significant loss relative to forecast. In this case, the downside risk was greater than the upside potential.

ERM Case Study: Lego 

The Danish toy maker’s ERM evolved over the following four phases, according to a case study by one of the chief architects of its program:

• Traditional management of financial, operational, and other risks. Strategic risk management joined the ERM program in 2006. 
• The company added Monte Carlo simulations in 2008 to model financial performance volatility so that budgeting and financial processes could incorporate risk management. The technique is used in budget simulations, to assess risk in its credit portfolio, and to consolidate risk exposure. 
• Active risk and opportunity planning is part of making a business case for new projects before final decisions.
• The company prepares for uncertainty so that long-term strategies remain relevant and resilient under different scenarios. 

As part of its scenario modeling, Lego developed its PAPA (park, adapt, prepare, act) model. 

• Park: The company parks risks that occur slowly and have a low probability of happening, meaning it does not forget nor actively deal with them.
• Adapt: This response is for risks that evolve slowly and are certain or highly probable to occur. For example, a risk in this category is the changing nature of play and the evolution of buying power in different parts of the world. In this phase, the company adjusts, monitors the trend, and follows developments.
• Prepare: This category includes risks that have a low probability of occurring — but when they do, they emerge rapidly. These risks go into the ERM risk database with contingency plans, early warning indicators, and mitigation measures in place.
• Act: These are high-probability, fast-moving risks that must be acted upon to maintain strategy. For example, developments around connectivity, mobile devices, and online activity are in this category because of the rapid pace of change and the influence on the way children play. 

Lego views risk management as a way to better equip itself to take risks than its competitors. In the case study, the writer likens this approach to the need for the fastest race cars to have the best brakes and steering to achieve top speeds.

ERM Case Study: University of California 

The University of California, one of the biggest U.S. public university systems, introduced a new view of risk to its workforce when it implemented enterprise risk management in 2005. Previously, the function was merely seen as a compliance requirement.

ERM became a way to support the university’s mission of education and research, drawing on collaboration of the system’s employees across departments. “Our philosophy is, ‘Everyone is a risk manager,’” Erike Young, deputy director of ERM told Treasury and Risk magazine. “Anyone who’s in a management position technically manages some type of risk.”

The university faces a diverse set of risks, including cybersecurity, hospital liability, reduced government financial support, and earthquakes.  

The ERM department had to overhaul systems to create a unified view of risk because its information and processes were not linked. Software enabled both an organizational picture of risk and highly detailed drilldowns on individual risks. Risk managers also developed tools for risk assessment, risk ranking, and risk modeling. 

Better risk management has provided more than $100 million in annual cost savings and nearly $500 million in cost avoidance, according to UC officials. 

UC drives ERM with risk management departments at each of its 10 locations and leverages university subject matter experts to form multidisciplinary workgroups that develop process improvements.

APQC, a standards quality organization, recognized UC as a top global ERM practice organization, and the university system has won other awards. The university says in 2010 it was the first nonfinancial organization to win credit-rating agency recognition of its ERM program.

Examples of How Technology Is Transforming Enterprise Risk Management

Business intelligence software has propelled major progress in enterprise risk management because the technology enables risk managers to bring their information together, analyze it, and forecast how risk scenarios would impact their business.

ERM organizations are using computing and data-handling advancements such as blockchain for new innovations in strengthening risk management. Following are case studies of a few examples.

ERM Case Study: Bank of New York Mellon 

In 2021, the bank joined with Google Cloud to use machine learning and artificial intelligence to predict and reduce the risk that transactions in the $22 trillion U.S. Treasury market will fail to settle. Settlement failure means a buyer and seller do not exchange cash and securities by the close of business on the scheduled date. 

The party that fails to settle is assessed a daily financial penalty, and a high level of settlement failures can indicate market liquidity problems and rising risk. BNY says that, on average, about 2 percent of transactions fail to settle.

The bank trained models with millions of trades to consider every factor that could result in settlement failure. The service uses market-wide intraday trading metrics, trading velocity, scarcity indicators, volume, the number of trades settled per hour, seasonality, issuance patterns, and other signals. 

The bank said it predicts about 40 percent of settlement failures with 90 percent accuracy. But it also cautioned against overconfidence in the technology as the model continues to improve. 

AI-driven forecasting reduces risk for BNY clients in the Treasury market and saves costs. For example, a predictive view of settlement risks helps bond dealers more accurately manage their liquidity buffers, avoid penalties, optimize their funding sources, and offset the risks of failed settlements. In the long run, such forecasting tools could improve the health of the financial market. 

ERM Case Study: PwC

Consulting company PwC has leveraged a vast information storehouse known as a data lake to help its customers manage risk from suppliers.

A data lake stores both structured or unstructured information, meaning data in highly organized, standardized formats as well as unstandardized data. This means that everything from raw audio to credit card numbers can live in a data lake. 

Using techniques pioneered in national security, PwC built a risk data lake that integrates information from client companies, public databases, user devices, and industry sources. Algorithms find patterns that can signify unidentified risks.

One of PwC’s first uses of this data lake was a program to help companies uncover risks from their vendors and suppliers. Companies can violate laws, harm their reputations, suffer fraud, and risk their proprietary information by doing business with the wrong vendor. 

Today’s complex global supply chains mean companies may be several degrees removed from the source of this risk, which makes it hard to spot and mitigate. For example, a product made with outlawed child labor could be traded through several intermediaries before it reaches a retailer. 

PwC’s service helps companies recognize risk beyond their primary vendors and continue to monitor that risk over time as more information enters the data lake.

ERM Case Study: Financial Services

As analytics have become a pillar of forecasting and risk management for banks and other financial institutions, a new risk has emerged: model risk . This refers to the risk that machine-learning models will lead users to an unreliable understanding of risk or have unintended consequences.

For example, a 6 percent drop in the value of the British pound over the course of a few minutes in 2016 stemmed from currency trading algorithms that spiralled into a negative loop. A Twitter-reading program began an automated selling of the pound after comments by a French official, and other selling algorithms kicked in once the currency dropped below a certain level.

U.S. banking regulators are so concerned about model risk that the Federal Reserve set up a model validation council in 2012 to assess the models that banks use in running risk simulations for capital adequacy requirements. Regulators in Europe and elsewhere also require model validation.

A form of managing risk from a risk-management tool, model validation is an effort to reduce risk from machine learning. The technology-driven rise in modeling capacity has caused such models to proliferate, and banks can use hundreds of models to assess different risks. 

Model risk management can reduce rising costs for modeling by an estimated 20 to 30 percent by building a validation workflow, prioritizing models that are most important to business decisions, and implementing automation for testing and other tasks, according to McKinsey.

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Conclusion 

Financial case studies are invaluable tools for understanding real-world financial scenarios and developing practical solutions. By examining concrete examples, individuals and organizations can gain insights into financial challenges, apply analytical techniques, and make informed decisions. 

This article has highlighted the importance of collecting financial case study examples and accompanying samples and templates as valuable resources for learning and applying financial principles in various contexts. These resources can serve as guides for conducting comprehensive analyses, formulating recommendations, and ultimately achieving financial success.

FAQs on Financial Case Study

What is a case study in finance.

A case study in finance is an in-depth analysis of a specific financial situation, company, investment, or financial strategy. It involves examining real-world scenarios, often based on actual events, to understand and evaluate the financial implications, decision-making processes, and outcomes.

In finance, case studies are commonly used as a teaching and learning tool to assess and explore complex financial issues in academic and professional settings. They provide a practical approach to understanding financial theories, concepts, and practices by applying them to real-life situations.

A finance case study typically involves the following elements:

• Background: The case study begins by presenting relevant information about the company, industry, or financial situation under examination. This includes details about the organization's financial statements, market conditions, competitive landscape, and other pertinent background information.
• Problem or Challenge: The case study outlines the specific financial problem or challenge that needs to be addressed. This could be related to financial analysis, investment decisions, capital budgeting, risk management, financial restructuring, or any other financial aspect of the organization.
• Data Analysis: The case study analyzes financial data, such as income statements, balance sheets, cash flow statements, and key financial ratios. Various financial analysis tools and techniques, such as ratio analysis, discounted cash flow analysis, or valuation models, may be used to evaluate the situation.
• Alternatives and Solutions: Based on the analysis, different alternatives or solutions are identified to address the financial problem or challenge. These could include recommendations for financial strategies, investment decisions, capital allocation, cost reduction measures, or other relevant actions.
• Decision-Making and Implementation: The case study explores the decision-making process, considering risk, return, financial feasibility, and strategic considerations. It also discusses the potential implementation of the recommended solution and the expected outcomes.
• Lessons Learned: The case study concludes by discussing the lessons learned from the financial situation or decision-making process. This may involve reflections on successful strategies, potential pitfalls, and broader implications for financial management and decision-making in similar contexts.

How do you write a financial case study?

Writing a financial case study involves analyzing a real or hypothetical financial situation or problem and presenting a detailed examination of the facts, analysis, and potential solutions. Here is a step-by-step guide on how to write a financial case study:

• Identify the purpose and scope: Clearly define the purpose of the case study and the specific financial issue you want to address. Determine the scope of the study, including the period, entities involved, and relevant financial data.
• Gather information: Collect all relevant financial data and supporting documents related to the case. This may include financial statements, transaction records, market data, industry reports, and any other information necessary for the analysis.
• Describe the background: Provide an overview of the company or individual involved in the case study. Include relevant details such as the company's history, industry , size, key stakeholders, and any recent events or developments that may have a financial impact.
• State the problem or objective: Clearly define the financial problem or objective that needs to be addressed. Identify the key challenges or issues the company or individual faces and explain why they are essential.
• Conduct financial analysis: Analyze the financial data and apply appropriate financial analysis techniques to evaluate the situation. This may involve calculating financial ratios, conducting trend analysis, performing a discounted cash flow analysis, or any other relevant method to gain insights into the financial performance and position of the entity.
• Present findings: Summarize the results of the financial analysis clearly and concisely. Highlight key findings, trends, and any significant financial situation factors. Use graphs, charts, or tables to present data effectively.
• Discuss alternative solutions: Propose different options or strategies to address the financial problem or achieve the objective. Determine the advantages and drawbacks of each solution and provide supporting evidence or calculations to justify your recommendations.
• Make recommendations: Make clear and actionable recommendations based on analyzing and evaluating the alternative solutions. Support your recommendations with logical reasoning and explain how they can improve the financial situation or achieve the desired outcome.
• Provide a conclusion: Summarize the main points of the case study and restate the recommendations. Highlight any potential risks or challenges associated with implementing the proposed solutions.
• Include references and citations: If you have used external sources or references, provide proper citations to give credit to the authors and avoid duplicity or redundancy.
• Edit and proofread: Review the case study for clarity, coherence, and accuracy. Check for any grammatical or spelling errors. Ensure that the document is well-structured and easy to understand.

What is finance study?

Finance study refers to the field of knowledge and an academic discipline that focuses on managing, creating, and allocating financial resources. It involves studying various aspects of financial systems, instruments, markets, and institutions. Finance encompasses the theory and practice of managing money, investments, and financial decision-making.

The study of finance covers a wide range of topics, including:

• Corporate Finance: This area focuses on financial decisions and strategies within corporations. It includes capital budgeting, investment analysis, financial planning, risk management, and corporate valuation.
• Investments: This field examines allocating money to different financial assets including, stocks, mutual funds, real estate, and other derivatives. It involves analyzing risk and return, portfolio management, asset pricing models, and investment strategies.
• Financial Institutions and Markets: This area explores the functioning of financial institutions (such as banks, insurance companies, and investment firms) and financial markets (such as stock markets, bond markets, and foreign exchange markets). It involves studying the role of these institutions and markets in facilitating the flow of funds, managing risks, and pricing financial assets.
• International Finance: This branch focuses on financial transactions and relationships between countries and across borders. It covers foreign exchange rates, international investment, multinational corporations, and global financial markets.
• Personal Finance: This area focuses on individual or household financial management. It involves budgeting, saving, investing, retirement planning, taxation, and managing personal debt.

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Top 40 Most Popular Case Studies of 2021

Two cases about Hertz claimed top spots in 2021's Top 40 Most Popular Case Studies

Two cases on the uses of debt and equity at Hertz claimed top spots in the CRDT’s (Case Research and Development Team) 2021 top 40 review of cases.

Hertz (A) took the top spot. The case details the financial structure of the rental car company through the end of 2019. Hertz (B), which ranked third in CRDT’s list, describes the company’s struggles during the early part of the COVID pandemic and its eventual need to enter Chapter 11 bankruptcy. 

The success of the Hertz cases was unprecedented for the top 40 list. Usually, cases take a number of years to gain popularity, but the Hertz cases claimed top spots in their first year of release. Hertz (A) also became the first ‘cooked’ case to top the annual review, as all of the other winners had been web-based ‘raw’ cases.

Besides introducing students to the complicated financing required to maintain an enormous fleet of cars, the Hertz cases also expanded the diversity of case protagonists. Kathyrn Marinello was the CEO of Hertz during this period and the CFO, Jamere Jackson is black.

Sandwiched between the two Hertz cases, Coffee 2016, a perennial best seller, finished second. “Glory, Glory, Man United!” a case about an English football team’s IPO made a surprise move to number four.  Cases on search fund boards, the future of malls,  Norway’s Sovereign Wealth fund, Prodigy Finance, the Mayo Clinic, and Cadbury rounded out the top ten.

Other year-end data for 2021 showed:

• Online “raw” case usage remained steady as compared to 2020 with over 35K users from 170 countries and all 50 U.S. states interacting with 196 cases.
• Fifty four percent of raw case users came from outside the U.S..
• The Yale School of Management (SOM) case study directory pages received over 160K page views from 177 countries with approximately a third originating in India followed by the U.S. and the Philippines.
• Twenty-six of the cases in the list are raw cases.
• A third of the cases feature a woman protagonist.
• Orders for Yale SOM case studies increased by almost 50% compared to 2020.
• The top 40 cases were supervised by 19 different Yale SOM faculty members, several supervising multiple cases.

CRDT compiled the Top 40 list by combining data from its case store, Google Analytics, and other measures of interest and adoption.

All of this year’s Top 40 cases are available for purchase from the Yale Management Media store .

And the Top 40 cases studies of 2021 are:

1.   Hertz Global Holdings (A): Uses of Debt and Equity

2.   Coffee 2016

3.   Hertz Global Holdings (B): Uses of Debt and Equity 2020

4.   Glory, Glory Man United!

5.   Search Fund Company Boards: How CEOs Can Build Boards to Help Them Thrive

6.   The Future of Malls: Was Decline Inevitable?

7.   Strategy for Norway's Pension Fund Global

8.   Prodigy Finance

9.   Design at Mayo

10. Cadbury

11. City Hospital Emergency Room

13. Volkswagen

14. Marina Bay Sands

15. Shake Shack IPO

16. Mastercard

17. Netflix

18. Ant Financial

19. AXA: Creating the New CR Metrics

20. IBM Corporate Service Corps

21. Business Leadership in South Africa's 1994 Reforms

22. Alternative Meat Industry

23. Children's Premier

24. Khalil Tawil and Umi (A)

25. Palm Oil 2016

26. Teach For All: Designing a Global Network

27. What's Next? Search Fund Entrepreneurs Reflect on Life After Exit

28. Searching for a Search Fund Structure: A Student Takes a Tour of Various Options

30. Project Sammaan

31. Commonfund ESG

32. Polaroid

33. Connecticut Green Bank 2018: After the Raid

34. FieldFresh Foods

35. The Alibaba Group

36. 360 State Street: Real Options

37. Herman Miller

38. AgBiome

39. Nathan Cummings Foundation

40. Toyota 2010

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Financial Risk Management Harvard Case Solution & Analysis

Home >> Finance Case Studies Analysis >> Financial Risk Management

Financial Risk management

The banker (portfolio manager) normally attempts to increase the value of the portfolio of investment subject to instruction that imposes various constraints on the banker. Financial Risk management is very much concerned about the difference between the values of the portfolio of assets and the liabilities which are associated with this portfolio of assets.

The main advantage of central Risk management is the absence of the conflict of interest. Central Risk management is not extracted through market. Each business is seen by different ways. Independence fails in financial risk management just because of when banker takes a higher risk in order to get personal gain. When an individual takes a risk more than risk appetite of the company it results in independence fails.

Financial risk management is all about identification, quantifying and management of the risk that the organization faces. It is not possible to eliminate risk but by performing effective financial risk management, organization can reduce the risk to the acceptable level. Every organization has risk appetite, and remaining within the risk appetite, the portfolio of manager of the organization make investments (financial times, n.d.).

Financial Risk Management

The confusion always exists between trader and the banker. The objective of the trader is to make banker conduct transaction for trading so as to get commission on every transaction. It increases the conflict of interest because whether investment in asset is risky or not the trade will persuade the banker in order to make investment.

The objective of the banker is to maximize the value of company’s portfolio of investment that is why he considers all possible outcomes and remain overcautious about risk management. Trader normally prefers riskiest asset even though this selection could lead to destroying value of the portfolio of the investment.

 By using this model we can see risk management failure and confusion about bankers and traders. First we can see the increase confusion in the choices of the two assets of trader results in inappropriate selection of the asset for investment. The pressure on the trade poses the trader in a situation where he is asked to increase the PNL and it results in prevention of risk management from performing effectively.

If trader prefers risky asset to banker then increase in risk of assets traded results in reduction of the positive impact of risk management independence. Since trader gives preference to risky assets, trader becomes more biased towards risky assets. It creates confusion between trader and banker for choosing appropriate asset for investment.

By performing hedging, financial professionals can meet the number of risk management objectives such as they can decrease volatility of cash flows, the can offset interest rate fluctuations to minimize price risk and default risk etc. (amazon, n.d.).

In order to protect for volatility of the price of assets, in which investment has been made, the banker carry out hedging techniques. The hedging assists bankers in minimizing expected loss. The banker attempts to go towards forward rate agreement and options in order to hedge its investment the trader who provides options and forward rate agreement to banker will seek for providing higher number of options. The confusion between banker and trader would remain exist because if options become favorable to banker then he is going to exercise that option and it results in loss to trader who provided option.

Nonetheless, Trader could protect himself through delta hedging. Delta hedging from the perspective of the writer of the option is neutral. Banker can provide the expected loss that could happen to the portfolio of investment by using Value at risk.

Creation of Income

The confusion between banker and trader exists because the objective of the banker differs the objective of the trader. The confusion of creation of wealth between banker and trader is to banker create wealth by making secured investments and less risky in which volatility of the prices is low.  However, the trader always persuades the banker for making investment in assets whether it is risky or not. Since trader earns commission on the each transaction conducted by banker. This is what confusion remain between banker and trader with respect to financial risk management.

Failure of the Financial Risk management

The risk management function has been gained attention due to the recent market turmoil. Due to failure of Risk management in recent marker turmoil, traders are trying to protect themselves for rare events. In the period that led to market turmoil, the financial risk management has failed to perform its function...............

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Case study - Traded Market Risk

Does your in-house team have the expertise to interpret the FRTB regulations?

Extend full revaluation of value at risk & stress testing into FRTB compliance with full support for the standard approach (SA) & internal model approach (IMA).

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Background of study

The Fundamental Review of the Trading Book (FRTB) requires banks to make a more rigorous assessment of their exposure to market risk, including new eligibility tests for risk factors used (RFET) to derive capital requirements under a revised Internal Model Approach (IMA).

With changing deadlines for compliance and varying local interpretations, firms continue to struggle with the complexity of the guidelines under fluctuating budgets.

A leading tier 1 bank looked for an agile yet robust solution that would help them gain insight on and build their internal business case for FRTB IMA. This both supported regulatory QIS and refined their business and infrastructure strategies ahead of regulatory go-live.

Pain Points

The bank’s risk management team needed to build out an FRTB-ready risk infrastructure in a timely manner and with budgetary constraints. In particular they needed to:

• Reduce the total cost of ownership of their FRTB infrastructure and shorten time to delivery both for programmes and QIS
• Gain visibility on the capital impact of new trades, model assumptions and changing market conditions
• Manage exposure and resulting market risk capital requirements more effectively
• Hedge their implementations against global or local regulatory updates

The risk management team were aware that S&P Global Market Intelligence is a leading provider of traded market risk solutions and contacted us to learn more about the offering.

“We rolled out a full scale QIS capability in 2 months delivered the business case 9-12 months earlier than with an internal build model.”

The solution.

S&P Global Market Intelligence specialists first described the Traded Market Risk solution , which combines market-leading data with cutting-edge analytics in a hosted service delivered by a team of subject matter experts. The specialists described how the solution can enable compliance with the Basel market risk requirements whilst reducing the impact, cost and complexity of market risk projects.

For FRTB more specifically, the solution delivers IMA and SA capital management through to IMA specific requirements of passing the Risk Factor Eligibility Test (RFET), ES vs SES scenario generation and NMRF proxying.

Under volatile market conditions, banks can leverage our pre-populated, extensive RPO datasets delivering realistic and actionable RFET results. These datasets, updated daily, drove pro-active investigations across interest rate, fixed income, credit, equity or FX derivatives depending on portfolio composition. As one user commented, “it was very easy to demonstrate the benefit of S&P curated RPO data sets on IMA capital”.

Whilst many banks have similar broad RFET definitions, the consequences of risk factor observability translate very differently in IMA capital terms on individual portfolios. Using our Traded Market Risk solution, risk quants could measure the capital impact of a change in modellability mapping assumption and NMRF proxy decision in a matter of minutes using its sensitivity-based capital what-if capability. This gave the bank a powerful decision-making tool to inform day-to-day project activities. This in turn drove buy-in from senior management as well as regulators and enabled the bank to run multiple capital scenarios concurrently with minimal impact on their existing infrastructure.

“The bank was able to increase modellable risk factors eligible for ES models under IMA by 40% on average.”

Other FRTB teams using our Traded Market Risk solution have also built rapid insight into IMA vs SA benefits and key focus areas for data and model fine-tuning by leveraging our agile self-service configuration capability. This has helped shape regulatory interactions and maximise value under growing budget constraints, while educating internal stakeholders and regulators alike on their model assumptions and capital analyses.

Project outcomes and benefits

Accelerated time-to-delivery

The Traded Market Risk solution offered an accelerated time-to-delivery where the bank rolled out full-scale QIS capability for the first asset class in two months and the whole portfolio in under 6 months after an initial proof of concept. A single user can now update current QIS analyses as a part-time activity in a month. Another bank was able to deliver an IMA vs SA business case decision 9 to 12 months earlier compared to internal builds.

Reduced capital charges

The bank was able to increase modellable risk factors eligible for ES models under IMA by 40% on average for interest rate derivatives by using the Traded Market Risk FRTB data service. They were able to proxy another 20% non-modellable risk factors on average across asset classes by using the scenario service thereby attracting much lower SES capital charges on the resulting basis.

Reduced total cost of ownership

The client significantly reduced the Total Cost of Ownership (TCO) for FRTB with Traded Market Risk and significantly accelerated their IMA programme using fewer internal resources than originally estimated. The resulting reprioritisation of resources enabled this client to focus on key internal requirements instead, which benefited the bank beyond FRTB, such as pricing library enhancements or data remediation.

Agile implementations

By using the Traded Market Risk modular implementation, the bank could prioritise the most relevant infrastructure components first and leverage in-house developments (or third-party projects) as and when required. This also helped smooth “stop/start” phases of FRTB programmes subject to budget revisions and timeline changes.

Non-invasive, realistic model tuning

A realistic bank-specific IMA configuration requires 9 to 12 months of “model tuning”. This process includes refining RFET mappings, validating market data, and selecting proxy choices in order to understand the impact of changes in the portfolio, market liquidity and prices, or even the consequences of failing model validation.

Model tuning requires the risk analysts to be able to run realistic analyses in an accessible, non-invasive infrastructure while implementation is being executed in parallel.

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Connect with our product expert

Jean Zottner

Throughout his career, Jean has worked on the multiple aspects of product management, quantitative risk and system development. With over 13 years of experience in fintech and banking, he is an expert in quantitative risk and product design. He is passionate about using technology to solve business challenges and to streamline processes.Jean holds an MSc in Computer Science obtained with distinction from Oxford University, as well as an Engineering degree from ENSIIE, a French Grande Ecole.

• Financial Services
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• Fundamental Review of the Trading Book (FRTB)