A Senior Manager's Guide to Integrated Risk Management

This paper provides an overview of corporate risk management for senior managers. The author discusses the integrated risk management framework, emphasizing that a company can implement its risk management objectives in three fundamental ways: modifying its operations, using targeted financial instruments, or adjusting its capital structure. “Integration” refers both to the aggregation of all risks faced by the firm into a net exposure and to the coordinated use of these three risk management techniques. The author provides a functional analysis of integrated risk management using a wide‐ranging set of case illustrations to show how the risk management process influences, and is influenced by, a company's overall strategy and business activities. Based on such analysis, the article concludes by sketching a framework intended to help managers design a value‐maximizing, enterprise‐wide corporate risk management system.