Most books on
corporate risk management are pretty useless. They take techniques of bank risk management and warm them over for corporate use—as if
every corporation's risks fit neatly into the Basel framework of market risk, credit risk or operational risk.
There is actually very little useful material out there. I think the reason is
because every industry—indeed, every corporation—is different. The risks faced
by an overnight delivery firm are fundamentally different from those faced by a
copper mining firm. And those risks are different from the ones faced by a
corporation that runs ski resorts.
A useful book on
corporate risk management would either have to be very high-level or focus on
the risks of a particular type of industry. The former would be of limited
value. This book by Merna and AL-Thani takes the latter course. While it
addresses the topic of corporate risk management generally, the focus is on
project risk—where projects might be development of, say, office buildings,
energy infrastructure or sports stadiums.
Risk is the
unifying theme throughout. Within that context, there are high-level chapters on
corporate governance and strategic risk. But most of the book focuses on more
tactical project risks. There are chapters on project finance and project
management. A discussion of the evolution of risk management assumes the
perspective of project risk. A chapter on portfolio analysis doesn't mention
Markowitz or Sharpe. It is about portfolios of projects.
Contents
1. Introduction
2.The Concept of Risk and Uncertainty and the Sources and Types of
Risk
3. The Evolution of Risk
Management and the Risk Management Process
4. Risk Management Tools and Techniques
5. Financing Projects, Their Risks and Risk Modelling
6. Portfolio Analysis and Cash Flows
7. Risk Management at Corporate Level
8. Risk Management at Strategic Business Level
9. Risk Management at Project Level
10. Risk Management at Corporate, Strategic Business and Project
Levels
Needless to say,
this is the right way to write a book on corporate risk management—pick a
particular type of industry, and write about managing its risks. This limits the
audience, but it produces a book that will actually be useful for its limited
audience.
If there is a
shortcoming to this particular book, it is its academic, almost agnostic style.
The book reads as one citation of the literature after another. We are told what
this author said, and that author and some other authors, but we are largely
left to follow up on the citations ourselves and decide what is useful or not.
In some cases, the most important authors aren't cited. For example, Frank
Knight's distinction between risk and uncertainty is discussed at length, but
Frank Knight is never mentioned!
Note that the
few mentions of laws or legal risk address UK/Euro laws.
If you need to
manage project finance risk, certainly read this book. You will learn from what
it says. You will learn more from what it cites. [December 7, 2006]
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