Risk Management at Board Level

Risk Management today has moved from being the topic of top level conferences and media discussions to being a permanent issue in the board and top management agenda. Several new directives and regulations in Switzerland, Germany and EU make it obligatory for the firms to have a risk management strategy and transparently disclose the risk management process to their stakeholders. Shareholders, insurance providers, banks, media, analysts, employees, suppliers and other stakeholders expect the board members to be pro-active in knowing the critical risks facing their organization and provide them with a reasonable assurance vis-à-vis the management of those risks. In this environment however, the lack of standards and training opportunities makes this task difficult for board members.



This book with the help of real life examples, analysis of drivers, interpretation of the Swiss legal requirements, and information based on international benchmarks tries to reach out to the forward looking leaders of today's businesses. The authors have collectively brought their years of scientific and practical experience in risk management, Swiss law and board memberships together to provide the board members practical solutions in risk management. The desire is that this book will clear the fear regarding risk management from the minds of the company leadership and help them in making risk savvy decisions in quest to achieve their strategic objectives.



Dr. oec. Vinay Kalia works as an Operational Risk Manager for UBS within Group Risk Control. Prior to this position he was employed at the international Auditing firm KPMG Limited, Switzerland, as manager at Risk and Sustainability Advisory Services. During his PhD, while assisting Prof. Roman Boutellier at the Swiss Federal Institute of Technology, Zurich (ETHZ), benchmarked best in the class Risk Managed Companies, by advising some companies within Switzerland. He is a portfolio partner at the International Center for Corporate Governance University of St. Gallen (www.icfcg.org) with expertise in Enterprise Risk Management. Vinay has attained an MBA from the Nanyang Business School, Singapore. From the earlier part of his life and career, he brings a broad set of experience such as knowhow in Hospitality and Tourism industry in Asia including India and Singapore.



Prof. Dr. Roland Muller studied law at the Universities of Geneva and Zurich. He earned his PhD in 1983, and passed the bar exam as a lawyer and public notary in 1985. In 2001, the University of St. Gallen elected Roland Muller as a lecturer for private law, and in 2005, he was nominated as a professor for private law, commercial law, and aviation law based on his habilitation. In 2005, he initiated the foundation of the Center for Aviation Competence at the University of St. Gallen. In 2014, he was awarded the title Professor for Labour and Industrial Law by the University of Bern. Today, he works at the Universities of St. Gallen and Bern, and is also Senior Partner in the law firm ME Advocat AG in Staad/SG in the areas of corporate governance, labor law, and aviation law. He is chairman or a member of the board of directors of several Swiss companies, and is chairman of the Financial Market Authority in Liechtenstein.



Abbreviations 21

I Introduction 25

1 General Overview 25

2 Importance of Risk Management 28

3 Role of Board Members in Risk Management 29

4 Definitions and Concepts 37

5 Risk Management Standards 47

II Development of Risk Management 56

1 Overview of the Development Stages 56

2 Risk Management and Corporate Governance 60

3 Risk Compliance 67

III Driving Forces of Risk Management in Switzerland 73

1 General Overview 73

2 Law as a Driving Force 74

3 Institutional Investors 76

4 Impact of US Developments 77

5 Press 77

6 Others 78

IV Risk Management Implementation 79

1 General Overview 79

2 Objective Setting 82

3 Risk Identification 84

4 Risk Assessment and Prioritisation 87

5 Risk Analysis 91

6 In-depth Risk Analysis 96

7 Action Planning 97

8 Monitoring, Reporting and Supervision 98

9 Culture 104

10 Tools 107

11 Timeline and Cost of Risk Management Implementation 108

V Uncontrollable Risks and Corporate Governance 111

1 Defining Uncontrollable Risks 111

2 Complex Systems Shaping Current Economic Landscape 113

3 Era of Black Swan Events (BSE) 116

4 Uncontrollable Risks and Boards 117

VI Managing Fraud and Corruption Risks 125

1 Problem Overview 125

2 Who are Involved? 129

3 Common Forms of Corruption 133

4 Managing the Risk of Fraud and Corruption 137

VII Risk Management of Major Projects 141

1 Why Risk Management of Projects at Board Level? 141

2 Risk Management Guidelines 143

3 Project Management Handbook 146

4 Project Credit Demand Report to the Board of Directors 146

5 Final Major Project Credit Demand Report (Closing of Internal Credit Line) 149

6 Reporting of Major Projects to the Board of Directors (Guidelines) 150

7 Aggregated Risks of a Company in Relation to Major Projects 155

8 Communication in Major Projects 157

9 External Risks for Major Projects 158

10 Decision-making to Minimise or Mitigate Risk of Major Projects 160

VIII Summary and Guidance for Practice 162

1 Summary 162

2 Risk Management Practice Today 166

Epilogue 175

Bibliography 176

Appendices 181

Editors 234