2/25/2009

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Who am I?

Specializing in:– Analyzing and mapping of risks – Setting up of a risk management system – Heightening of risk-awareness

– Lowering of Total Costs of Risk (TCoR)

Risk and Insurance Management Consultant

with over 28 years of international experience.

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What is Risk?

Risk is the uncertainty concerning the occurrence of a loss or other business adversity detrimental to the risk taker.

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Risk and consequences

Markov chain

• Andrei Markov (1856 – 1922)• Sequence of events and

dependencies• State of event and transitions

5More than 70% of TCoR is

unseen by most companies!

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Risk Management

Risk management is too often downgraded to a theoretical exercise.

Very often an organization does the initial steps of identifying and qualifying risks on paper quite well, but fail later to develop and apply the findings of this analysis against the bottom line.

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Risk Management

Risk management must be integrated into an organization’s management process.

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Logical Step

• One must consider how to spend not only less protecting the company against traditional risks.but

• One must consider how to spend better in protecting the company against those risks which are not expected.

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Risk Management

The normal risk management procedure is as follows –

1. Identification of risk.

2. Evaluation of risk.

3. Removal of risk.

4. Reduction of risk.

5. Transfer of risk.

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Risk retention might be the most cost-effective solution for many business risks.

This should be weighed against the probability and impact of any damage.

Risk Retention

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COST OF RISKCOST OF RISK TOTAL COSTS OF

TOTAL COSTS OFMITIGATIONMITIGATION

RISKRISK

Risk Management Analysis

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D irectL o sses

In d irectL o sses

Exp ected C o sto f Lo sses

In creasedPrecau tio ns

R edu cedA ctivity

C o st ofL o ss Co ntrol

R etentio n/Se lf-In su ran ce

In su ran ceC o ntrac ts

N o n-In su ran ceR isk transfers

C o st ofL o ss F in anc ing

D ivers ifica tion

In ves tm en ts in In form ation

C o st o f In tern alR isk R ed uction

Effects onSh areho lders an d O th erS takeh old ers

C o st of R esid u alU n certa in ty

T o tal C o sts o f R isk

TCoR=

Total Cost of Risks

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Information

– The information you have is not the information you want,

– The information you want is not the information you need,

– The information you need is not the information you can obtain,

– The information you can obtain costs more than you want to pay

(Source: Peter Bernstein - “Against the Gods” The Remarkable Story of Risk)

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Risk Mapping

• Risk management in today’s world demands clear and powerful tools.

• Risk mapping is a well-known technique which we use to help present identified risks and helps us to decide what actions should be taken toward those risks.

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Risk Mapping

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The Risk Control Organization

• Risk Management Committee - selected from the top levels of the program's project organization and provides overall guidance on risk management activities. Regularly reviews risks that could potentially have the most significant impact on the program (the "Top Twenty" risks). Validates that correct ownership has been allocated for all risks.

• Risk Owners – selected by the risk manager and/or the risk management committee. Responsible for formulating and implementing risk containment strategies. Risk owners are normally the managers most likely to be affected by the occurrence of the risks concerned.

• Risk Action Managers – assigned by risk owners, and charged with specific actions within the risk containment strategy.

• Planning Manager – ensures that risk control actions are incorporated into program plans and schedules. Provides the risk manager with versions if the program plan for risk modeling.

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“The Essence of Risk Management

Lies in Maximizing the Areas

Where We Have Some Control Over

the Outcome, While Minimizing the

Areas Where We Have Absolutely

No Control Over the Outcome”

(Source: Peter Bernstein - “Against the Gods” The Remarkable

Story of Risk)