Examples drawn from Microsoft and Salomon Brothers illustrate how integrated risk
management extends across functional boundaries within the firm, and how a risk
management perspective yields insight into seemingly-unrelated managerial decisions for
the firm. Consider Microsoft’s use of a greater proportion of temporary employees in the
organization that one might normally expect. By reducing operating leverage (here the
fixed costs of a more permanent workforce), Microsoft has more flexibility to respond to
unexpected shocks in demand, technology or regulation, thereby improving its chances of
survival, and mitigating the potential for even more severe collateral effects. This
operational flexibility is particularly important for Microsoft, as it competes in a rapidly
changing, volatile industry, whose future shape is uncertain.