The Universe of Risk: How Top Business Leaders Control Risk and Achieve Success

317 Pages·2002·1.54 MB·English

by  Pamela Shimell

The universe
of risk
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The universe
of risk
How top business leaders control
risk and achieve success
Pamela Shimell
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First published in Great Britain in 2002
© Pamela Shimell 2002
The right ofPamela Shimell to be identified as Author
ofthis Work has been asserted by her in accordance
with the Copyright, Designs and Patents Act 1988.
ISBN 0 273 65642 2
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About the author
P amela Shimellis Managing Consultant at the risk management and strategy
consulting firm PRISCONSULT.
She previously worked in Assurance and Business Advisory at Arthur Andersen
where she launched a new UK risk management competency, Environmental Risk
Consulting. While at Andersen she worked in the UK and world-wide on assign-
ments in teams of up to 44, with professionals from global corporate finance,
business risk consulting and assurance, energy and utilities, petroleum products,
tax, real estate, Anderson legal and business consulting.
Before that she was managing director of Industry & Environment Associates
(IEA), Oxfordshire. She is known for having devised the first comprehensive corpo-
rate environment policy for a UK client, and is one of the leading practitioners of
stakeholder risk consulting. She has advised clients on staff training, public affairs
and crisis management.
She has been a contributor to Investors Chronicle;Thames Valley Business maga-
xine; Waste, The Sunday Times Business News and The Times. Previous
publications include A Trouble-Shooter’s Guide to Environmental Management
Systems(Kogan Page); Directors’ Environmental Liabilities(Arthur Andersen client
publication, 1999); Greening the Workplace (first draft for the Trades Union
Congress, 1991); Corporate Environmental Policy in Practice (International Journal
of Strategic Management, Long-Range Planning, 1991); and Corporate
Environmental Policy(Institute of Directors Manual, 1991). She has given presen-
tations to many conferences in the UK and mainland Europe, and was featured as
one of three significant practitioners in The Greening of Business, the BBC TV pro-
gramme on environmental auditing.
She is married with two sons, Simon, aged 20, who is reading philosophy at the
University of Sussex, and Robert, 23, who works in the ISdepartment at Invesco
Perpetual, Oxfordshire.
Her specialities in consulting are in business start-ups; managing change; strat-
egy; renewable energy; and environmental, ethical and social risk. She has provided
expert advice to three study groups on renewable energy and electricity from renew-
able sources set up by the European Union’s Economic and Social Committee
(ECOSOC).
v

Contents
Preface, by John Richards, Managing Director, SGAM ix
Introduction xvii
Part I Corporate commitment 3
1 What is risk? 5
Part II Knowledge management and the New Economy 13
2 IT, IS, internal knowledge and
external knowledge 15
3 Data-mining with rich search tools,
interview with Arthur C. Ciccolo, IBM 30
4 Breakthroughs in IT productivity,
with Steven A. Ballmer and Jeff
Raikes, Microsoft 36
5 The Linux phenomenon 39
6 Business at the speed of light, interview with
Giorgio Anania, Bookham Technology 42
7 New Economy risks, interview with Peter
Morgan, Baltimore Technologies 57
Part IIIKey issues and players 73
8 The role of the corporate risk manager is
changing, interview with David
Gamble, AIRMIC 77
9 Addressing focus group concerns, interview
with Mary Harris, PA Consulting 84
10 Socially responsible investment, interview
with Larry Amon, NWF 89
Part IV The universe of risk 97
11 The risk model 99
12 Risk management in diversified financial
companies, report by the New York
Federal Reserve 108
vii
CONTENTS
13 A model embedded, enterprise-wide risk
management, interview with Steve Barlow, Prudential 111
14 The risk maturity approach, interview with
Susan Rucker, KPMG 128
15 Information risk management, interview with
Peter W. Morriss and Andrew Steet, KPMG 138
16 The role of the internal auditor, interview with
Richard Gossage, Royal Bank of Scotland 147
17 Types of risk 151
18 Branding and reputation risks 156
19 Protecting the brand, with Heiko Haasler,
De La Rue 160
20 Energy risk 164
Part V Corporate survival and the dynamics of change 171
21 What George W. Bush’s National Energy Policy
means for the utility industry, interview with
Mary Harris, PA Consulting 175
22 The competitive universe – product risk and process
risk, interview with Brian Fullerton, Merrill
Lynch Investment Managers 182
23 Biotech start-ups, interview with Peter Keen,
Merlin Biosciences 197
24 Biotech futures 211
25 The global biotech industry – high risks and high
rewards, interview with Jonathan
Pockson, Microscience 214
26 Challenging times for large pharmaceutical companies,
interview with Jonathan Symonds, AstraZeneca 226
27 Business interruption – our vision is never-fail,
interview with Richard Pursey, Global Continuity 244
28 Conservative values and biotech gambles, interview
with Gareth Hayward, Charles Stanley 253
29 The risk managers’ risk manager, interview with
Philip Thomas, Bass 260
30 Complacency kills, interview with Allan Leighton, bhs 265
31 Virtual music, interview with Sir Peter Michael
and Adam Turner, Virtual Music Stores 279
Bibliography 295
viii
Preface
By John Richards
Joint Managing Director,
Société Générale Asset Management
T his book by Pamela Shimell gives us a variety of perspectives on business risk and
what it means to the different players on the stage. She shows that there is a new
willingness among companies to incorporate risk assessment and management in the
business decision-making process, and this is well covered in Parts I to IV, Corporate
commitment, Knowledge management and the New Economy, Key issues and players,
and the Universe of risk, as well as in the interviews with British and American-based
consultants and business leaders in Part V Corporate survival and the dynamics of
change. Management style and decision-
making in the ‘old’ and ‘new’ economies I am always interested in “”
are discussed in revealing interviews. understanding how
As a fund manager, evaluating public management control their
companies and managing investments in
business and in the
them on clients’ behalf, I am always
overall structure of
interested in understanding how man-
corporate governance. It
agement control their business and in
tells you something about
the overall structure of corporate gover-
the people and the
nance. It tells you something about the
culture of the firm.
people and the culture ofthe firm.
Since the adoption of the Combined
Code and the Turnbull report, standards of governance have undoubtedly been raised
across the board. However, it has not eliminated the prospect of companies going
badly wrong because of poor risk control, and in some sense the shock to expecta-
tions is all the greater as investors can be falsely comforted by the apparent existence
ofan adequate governance infrastructure.
Whatever management systems are in place, it is people who run companies.
Paradoxically the more clarity and accountability in the management structure, the more
authority and discretion a CEOhas in the short term. Long term, the consistent shorten-
ing ofthe average tenure ofa CEO shows us the other side ofthe accountability coin.
ix