Syllabus

Title

6073 K5 - Enterprise Risk Management (A Case Study Approach)

Instructors

Prof. Dr. Robert E. Hoyt

Contact details

coursesinenglish@wu.ac.at

Type

Weekly hours

Language of instruction

Englisch

Registration

02/09/17 to 02/24/17
Registration via LPIS

Notes to the course

Subject(s) Bachelor Programs

Specialization in Business Administration Course V - Finance

Dates

Day	Date	Time	Room
Wednesday	05/10/17	09:00 AM - 12:00 PM	TC.1.02
Thursday	05/11/17	09:00 AM - 12:00 PM	EA.6.026
Friday	05/12/17	09:00 AM - 12:00 PM	TC.4.01
Monday	05/15/17	09:00 AM - 12:00 PM	EA.6.026
Tuesday	05/16/17	09:00 AM - 12:00 PM	TC.5.03
Wednesday	05/17/17	09:00 AM - 12:00 PM	TC.5.27
Thursday	05/18/17	09:00 AM - 12:00 PM	TC.5.01
Friday	05/19/17	09:00 AM - 12:00 PM	TC.3.01
Monday	05/22/17	09:00 AM - 12:00 PM	TC.1.02
Tuesday	05/23/17	09:00 AM - 12:00 PM	EA.6.032

On this page:

Contact details
Contents
Learning outcomes
Teaching/learning method(s)
Assessment
Recommended previous knowledge and skills
Availability of lecturer(s)
Other
Unit details

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Contents

This course is organized in cooperation with the University of Georgia. Participating WU students will therefore have the unique opportunity to worktogether with students from University of Georgia, Terry College of Business, in an intercultural learning environment. The students from University of Georgia will stay at WU for the duration of the course.

Course content: As the name implies, this course uses a case studyapproach to educate students about the emerging and rapidly evolving concept ofEnterprise Risk Management (ERM). Corporations today face a wider array ofrisks than ever before, and investors, regulators and other parties are demanding that management understand and manage these risks in the mosteffective and efficient manner possible. This is the goal of Enterprise Risk Management.

The first part of the course will focus on the fundamentals of risk, risk management, and ERM, including an extensive analysis of why corporationsbother to manage risk at all. The second part of the course introduces avariety of recently developed ERM tools available to management. Finally, thelast part of the course covers the ERM implementation process, explores some applications of ERM, and considers the future outlook for ERM. Throughout thecourse, case studies will be used to highlight and reinforce the concepts and role of ERM.

Section 1: Introduction to Enterprise RiskManagement (Introduction to risk and risk Management, Rationale for riskmanagement in corporations, Introduction to Enterprise Risk Management,Quantitative methods in risk Management; Case: Risk Management at Apache)

Section 2: Tools of Enterprise Risk Management(The Risk Management Process, Securitization, Weather Risk Management; Case:USAA Catastrophe Risk Financing)

Section 3: Applications of Enterprise RiskManagement and ERM Outlook (Additional Risk Management Tools, ERM and CorporateGovernance, Lessons Learned from Firms who have Engaged in ERM, Outlook andChallenges for Enterprise Risk Management; Case: United Grain Growers:Enterprise Risk Management and Weather Risk)

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Learning outcomes

Thiscourse uses a case study approach to educate students about the emerging andrapidly evolving concept of Enterprise Risk Management (ERM).

At the end of this course,the student will be able to:

Explain the fundamentals of risk, risk management, and ERM,
Recognize and evaluate the potential risks for an enterprise,
Describe why and how business and organizations derive benefits from managing risks,
Be familiar with the ERM tools available to management,
Be able to implement an ERM process.

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Teaching/learning method(s)

Readings distributed by the instructor
Cases including the following: Risk Management at Apache, USAA Catastrophe Risk Financing, United Grain Growers: Enterprise Risk Management and Weather Risk
Case write-ups: Two to three case write-ups will be required.
Projects: There will be three team projects for the course. These include a regression analysis project, a simulation project, and a risk identification and assessment project.

All education material needed for the course will after successful registration be available for you at eLC e-learning commons www.elc.uga.edu, which is the e-learning platform of The University of Georgia. All course participants will get a registration instruction e-mail in time.

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Assessment

The course relies on case material and discussion, and as such the whole class will benefit from a high level of preparation and participation by each of participant.

The course grade will be determined based on:

class participation (10%),

case preparation (30%),

and three team projects (60%).

Attendance is compulsory. If you must be absent from class, notify the instructor in advance.

In any case a minimum of 80% attendance of course sessions is required to successfully pass the course.

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Recommended previous knowledge and skills

This course is appropriate for students in business, no prior study or experience in risk management is required.

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Availability of lecturer(s)

Dr. Rob Hoyt, Terry College of Business, University of Georgia, USA (http://www.terry.uga.edu/directory/profile/rhoyt/)

For administrative issues please contact silvia.gordon@wu.ac.at

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Other

Robert E. Hoyt (Ph.D. and M.A., WhartonSchool, University of Pennsylvania and B.S., University of Nebraska-Lincoln) isthe Dudley L. Moore, Jr. Chair of Insurance and has been a faculty member at theUniversity of Georgia since 1988. He is the Department Head for Insurance, LegalStudies, and Real Estate and was Interim Dean of the Terry College. He studiedas an ITT International Fellow for one year at the Universität zu Köln inCologne, Germany and was a Fulbright Visiting Professor of Risk Management atthe Vienna University of Economics and Business Administration (WirtschaftsuniversitätWien). He was the Swiss Re VisitingScholar at the LMU in Munich and the Gen Re Visiting Scholar at the Universityof Cologne.

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Unit details

Unit	Date	Contents
1		Section 1: Introduction to Enterprise Risk Management Topics: Introduction to risk and risk management - An Introduction to Risk and Uncertainty - An Introduction to Risk Management Rationale for risk management in corporations Introduction to Enterprise Risk Management - ERM described - Risk Measurement - Risk Classifications o Hazard risks o Financial risks o Operational risks o Strategic risks - ERM Drivers - ERM Value Proposition ERM Frameworks and Process - COSO Enterprise Risk Management – Integrated Framework - ISO 31000 Risk Management – Principles and Guidelines Review of the Primary Ways to Manage Risk - Modifying firm’s operations - Employing targeted financial instruments - Adjusting firm’s capital structure Quantitative methods in risk management - Discussion of tools for class assignments - Correlation and covariance - Trend analysis - Regression Case: Risk Management at Apache Regression Assignment (Risk Management at Burger Max) Description: The risk manager for Burger Max is undertaking a comprehensive analysis of the workers’ compensation injury claims for the firm’s U.S. operations. She has collected monthly data over the last three years with regard to workers’ compensation claims and several other items that she feels may be helpful in predicting future claims. You are a consultant with a risk management consulting firm specializing in detailed quantitative analysis of problems facing corporate risk managers. Your firm has been retained by Burger Max to perform a comprehensive regression analysis of its workers’ compensation claims. While the assignment will involve analytic tools, the focus of our discussion will be on interpreting the results and the likely managerial implications of your analysis for the management of Burger Max.
2		Section 2: Tools of Enterprise Risk Management Topics: The Risk Management Process - Risk Identification o Team approaches to risk assessment o Risk registers o Risk maps o Important Categories/Types of Risk -> Physical property and business continuity risk -> Legal risk -> Management liability risk -> Human resources risk -> Environmental risk -> Crime and Cyber risk -> Fleet risk - Risk Treatment - Risk Analysis - Risk Control - Risk Financing Risk Modeling - Methods of risk modeling - Analyzing event consequences - Value at Risk - Catastrophe modeling Securitization - Insurance-Linked Securities - Contingent capital Weather Risk Management Case: USAA Catastrophe Risk Financing Description: This case describes the first major risk financing using catastrophe bonds. It provides a basis for discussing the securitization of insurance risks. It highlights the important of contingent capital solutions for firms that face catastrophe risks. It illustrates tradeoffs and regulatory concerns with new methods of managing risk through alternative vehicles. It also illustrates concepts like geographic diversification and basis risk. Computing Value at Risk: A Simulation Exercise to Illustrate the Value of ERM Description: The main thing that we try to illustrate with this assignment is that assessing and managing individual risks one-by-one potentially ignores the relevance of these individual risks to the enterprise as a whole. Managing risks in silos can lead to inefficient decision making. Considering how these individual risks interact to form the overall risk profile of an organization is one of the central concepts to ERM, and provides a major motivation for organizations to manage risk on an enterprise-wide basis. Risk Mapping Exercise of Selected Companies (group analysis and debrief – using public information on selected firms) Description: Class participants are asked to identify as many risks as they can initially. Of the risks identified, we then ask them to determine what they are the five most important risks faced by the insurer. We suggest a risk mapping process in class.
3		Section 3: Applications of Enterprise Risk Management and ERM Outlook Topics: Additional Risk Management Tools ERM and Corporate Governance - Risk communication - Risk-Based Performance and Process Management o Key performance indicators (KPI) o Key risk indicators (KRI) - Creating a risk-aware culture - Role of the Board of Directors and Senior Management in ERM o Risk Oversight o Structure and Role of the Board o Corporate Governance and Risk Oversight o ERM and Strategy Lessons Learned from Practice and Research - Survey evidence - Academic research (value of ERM, how ERM adds value) - Lessons from the field Outlook and Challenges for Enterprise Risk Management Case: United Grain Growers: Enterprise Risk Management and Weather Risk Case: “Did Enterprise Risk Management Really Work?: The Case of Lincoln Financial Corporation” by Scott Engle Description: The 2008 financial crisis put Lincoln Financial’s enterprise risk management program to the test. How were they exposed, and how did they respond?

Unit

Date

Contents

Section 1: Introduction to Enterprise Risk Management

Topics:

Introduction to risk and risk management

- An Introduction to Risk and Uncertainty

- An Introduction to Risk Management

Rationale for risk management in corporations

Introduction to Enterprise Risk Management

- ERM described

- Risk Measurement

- Risk Classifications

o Hazard risks

o Financial risks

o Operational risks

o Strategic risks

- ERM Drivers

- ERM Value Proposition

ERM Frameworks and Process

- COSO Enterprise Risk Management – Integrated Framework

- ISO 31000 Risk Management – Principles and Guidelines

Review of the Primary Ways to Manage Risk

- Modifying firm’s operations

- Employing targeted financial instruments

- Adjusting firm’s capital structure

Quantitative methods in risk management

- Discussion of tools for class assignments

- Correlation and covariance

- Trend analysis

- Regression

Case: Risk Management at Apache

Regression Assignment (Risk Management at Burger Max)

Description: The risk manager for Burger Max is undertaking a comprehensive analysis of the workers’ compensation injury claims for the firm’s U.S. operations. She has collected monthly data over the last three years with regard to workers’ compensation claims and several other items that she feels may be helpful in predicting future claims. You are a consultant with a risk management consulting firm specializing in detailed quantitative analysis of problems facing corporate risk managers. Your firm has been retained by Burger Max to perform a comprehensive regression analysis of its workers’ compensation claims. While the assignment will involve analytic tools, the focus of our discussion will be on interpreting the results and the likely managerial implications of your analysis for the management of Burger Max.

Section 2: Tools of Enterprise Risk Management

Topics:

The Risk Management Process

- Risk Identification

o Team approaches to risk assessment

o Risk registers

o Risk maps

o Important Categories/Types of Risk

-> Physical property and business continuity risk

-> Legal risk

-> Management liability risk

-> Human resources risk

-> Environmental risk

-> Crime and Cyber risk

-> Fleet risk

- Risk Treatment

- Risk Analysis

- Risk Control

- Risk Financing

Risk Modeling

- Methods of risk modeling

- Analyzing event consequences

- Value at Risk

- Catastrophe modeling

Securitization

- Insurance-Linked Securities

- Contingent capital

Weather Risk Management

Case: USAA Catastrophe Risk Financing

Description: This case describes the first major risk financing using catastrophe bonds. It provides a basis for discussing the securitization of insurance risks. It highlights the important of contingent capital solutions for firms that face catastrophe risks. It illustrates tradeoffs and regulatory concerns with new methods of managing risk through alternative vehicles. It also illustrates concepts like geographic diversification and basis risk.

Computing Value at Risk: A Simulation Exercise to Illustrate the Value of ERM

Description:

The main thing that we try to illustrate with this assignment is that assessing and managing individual risks one-by-one potentially ignores the relevance of these individual risks to the enterprise as a whole. Managing risks in silos can lead to inefficient decision making. Considering how these individual risks interact to form the overall risk profile of an organization is one of the central concepts to ERM, and provides a major motivation for organizations to manage risk on an enterprise-wide basis.

Risk Mapping Exercise of Selected Companies (group analysis and debrief – using public information on selected firms)

Description: Class participants are asked to identify as many risks as they can initially. Of the risks identified, we then ask them to determine what they are the five most important risks faced by the insurer. We suggest a risk mapping process in class.

Section 3: Applications of Enterprise Risk Management and ERM Outlook

Topics:

Additional Risk Management Tools

ERM and Corporate Governance

- Risk communication

- Risk-Based Performance and Process Management

o Key performance indicators (KPI)

o Key risk indicators (KRI)

- Creating a risk-aware culture

- Role of the Board of Directors and Senior Management in ERM

o Risk Oversight

o Structure and Role of the Board

o Corporate Governance and Risk Oversight

o ERM and Strategy

Lessons Learned from Practice and Research

- Survey evidence

- Academic research (value of ERM, how ERM adds value)

- Lessons from the field

Outlook and Challenges for Enterprise Risk Management

Case: United Grain Growers: Enterprise Risk Management and Weather Risk

Case: “Did Enterprise Risk Management Really Work?: The Case of Lincoln Financial Corporation” by Scott Engle

Description: The 2008 financial crisis put Lincoln Financial’s enterprise risk management program to the test. How were they exposed, and how did they respond?

Last edited: 2017-03-21

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