New Frontiers in Enterprise Risk Management (eBook)

Preface 5
Contents 7
Part I Preliminary 10
Introduction 11
Part I: Preliminary 11
Part II: ERM Perspectives 12
Part III: ERM Technologies 12
Part IV: Applications of ERM in China 13
Thanks to Authors 14
End Notes 14
The Human Reaction to Risk and Opportunity 15
Introduction 15
Risk and Risk Events 16
Ductile Systems 16
The Value of the System 18
Social Amplification of Risk 19
The Perception of Risk, Dread and Knowledge 20
The Processing of Risk: Emotion Versus Reason 22
Quantification as a Coping Mechanism 23
Incentives and Operational Risk 24
Conclusion 27
End Notes 28
Part II ERM Perspectives 31
Enterprise Risk Management: Financial and Accounting Perspectives 33
ERM and Finance Operations: Key Financial Risks 33
The Accounting Perspective: The COSO ERM Cube 40
Conclusions 44
End Notes 45
An Empirical Study on Enterprise Risk Management in Insurance 47
Enterprise Risk Management in Insurance 47
Multidisciplinary Views of Risk 48
Insurance Industry Practice 50
Discussion 55
Conclusion 60
End Notes 61
Supply Chain Risk Management 65
Supply Chain Risk Management Process 65
Supply Management 67
Demand Management 68
Product Management 69
Supply Chain Disruption 69
Supply Chain Risks 69
Multiple Criteria Selection Model 71
Conclusions 73
End Notes 74
Two Polar Concept of Project Risk Management 77
Risk Management Processes 77
Equilibriant RMPs and Related Gaps 78
A Two Polar RMP Framework for Projects 83
Conclusion 96
End Notes 97
Part III ERM Technologies 101
The Mathematics of Risk Transfer 103
Hedge Funds of the Twenty-First Century 103
Pricing Risk 105
Collateralized Fund Obligations 111
Non-Gaussian Returns 113
Challenges in the New Century 118
End Notes 120
Stable Models in Risk Management 121
Introduction 121
Stable Laws: Simulation and Calibration 122
GARCH Calibration and Some Numerical Problems 129
End Notes 132
Hybrid Calibration Procedures for Term Structure Models 133
Introduction 133
Preliminaries 134
Explicit Pricing Formulas 136
Hybrid Calibration Procedures 141
Risk Measures 148
Conclusion 151
End Notes 151
The Sarbanes-Oxley Act and the Production Efficiency of Public Accounting Firms 153
Introduction 153
Background and Hypothesis Development 154
Research Design 156
Empirical Estimation and Results 160
Conclusion 166
End Notes 168
Credit Risk Evaluation Using Neural Networks 171
Introduction 171
Review of Quantitative Credit Risk Prediction Techniques 172
Neural Network Basics 178
Discussion of Models and Results 180
Conclusions and Discussion 185
End Notes 186
Applying the Real Option Approach to Vendor Selection in IT Outsourcing 189
Information Technology Outsourcing 189
Review of Literature 190
Data and Methodology 193
Results 195
Conclusions and Future Study 198
End Notes 199
Part IV Applications of ERM in China 201
Assessment of Banking Operational Risk 203
Oprisk and Measurement Research 203
Assessment of Oprisk on DS Evidential Theory 206
Indicators of Oprisk’s Assessment 209
Model Structure and Demonstration 211
Conclusion 213
The Function of DS Evidential Theory in Oprisk Assessment 214
End Notes 215
Case Study of Risks in Cailing Chemical Corporation 217
Risk Composition of Cailing Chemical Corporation 217
Risk Assessment 222
Risk Analysis 223
Risk Distribution of Cailing Chemical Corporation 225
Conclusions 227
End Notes 229
Information Technology Outsourcing Risk: Trends in China 231
Introduction 231
Information Systems Risk 231
COSO Application of IS Risk Management 233
IS Risk Identification and Analysis 234
Outsourcing Risks 238
Tradeoffs in ERP Outsourcing 239
Outsourcing Risks in China 240
Conclusions 243
End Notes 243