KPMG Report Recommends Risk Executive, Stronger Risk Management
In a report issued last month, KPMG emphasizes the need for comprehensive, strategic risk management across an organization. Entitled “The Business Case for a Risk Executive: Leading Efforts to Avoid Surprises, Maneuver through Challenges, and Add Value,” the report notes that most current risk management efforts are specific to particular departments, projects, or regulations, and do not approach risk from an enterprise level. This had led to critical oversights and missed opportunities.
To address this gap, KMPG recommends the appointment of a risk executive. This person’s dedicated purpose is “to help prepare the organization to respond to change and the risks that emerge in changing times, and to turn those efforts into opportunities that benefit the organization.” More specifically, such an executive would unify risk approaches across business units and departments, standardize reporting, and establish a common risk “language.”
Read the full report (PDF)
The 2010 Palisade Risk Conference has now been announced and the date for your diary is April 14th-15th. The event will be taking place in the Institute of Directors in London’s Pall Mall and will cover a wide variety of innovative approaches to risk and decision analysis. With presentations from the likes of Unilever, Pricewaterhouse Coopers and Halcrow already confirmed, there will also be software training and sneak previews of new software in the pipeline. With more than 120 attendees, the last event in London proved to be a big hit, and we’re anticipating that the 2010 event will be an even bigger success.
» Call for Papers
» Register now for the Palisade Risk Conference in London, April 14-15, 2010
Palisade Conference in New York City
The 2009 Palisade Conference was held in New York City on October 21-22, and drew over 120 practitioners and decision-makers from a broad spectrum of industries. The event focused on risk analysis, applications, and training in the context of the global economy a year after the collapse of Lehman Brothers. The conference was held at the Hyatt Regency Jersey City on the Hudson River, overlooking lower Manhattan.
Dr. Sven Roden from the Decision Analysis Group of Unilever’s Finance Academy delivered the keynote address, entitled “Think Clearly, Act Decisively, Feel Confident.” The Finance Academy’s Andrea Dickens added further value by hosting an interactive workshop on data collection and interpretation.
Dr. Roden articulated the culture change within Unilever in the way the company approaches decision making across its many business units. Dubbed Decision Making Under Uncertainty, the Unilever approach brings together problem definition, commitment from stakeholders, quantitative analytics, and a long-term partnership with Palisade and its solutions.
Throughout the conference, common threads emerged regarding risk analysis in today’s business environment. For example, best practices in defining uncertain variables, establishing common model structures for analysts across work groups, and assessing risk at the organizational level were all discussed from various angles.
The conference is the second in Palisade’s 2009 conference series, which includes events in Munich, Germany, and Rio de Janeiro, Brazil.
“I thoroughly enjoyed the seminar. Great people showed up and
I have to admit, I was surprised many people from all corners of the world were there! ”
Thomas G. Gasparetti, Manager, Project Controls, Engineering,
Site Services, Sanofi Pasteur
“I appreciated the networking opportunity with other @RISK users.”
Alain Paul Martin, Chief Architect, Harvard University Global Systems
» Read more about the Palisade Conference
» Learn about and register for the Palisade Conference in Rio de Janeiro,
November 11-12, 2009
New Book featuring @RISK:
Mathletics by Wayne Winston
How Gamblers, Managers, and Sports Enthusiasts
Use Mathematics in Baseball, Basketball, and Football
Wayne Winston has written a number of books on operations research and finance, including the Financial Models series published by Palisade. His newest book, Mathletics, is a remarkably entertaining book that shows readers how to use the mathematical methods used by top managers to analyze a range of statistical and probability-related questions in professional baseball, basketball, and football, and in sports gambling. Winston writes in particular about the use of @RISK to run Monte Carlo simulations on game outcomes.
“Winston has an uncanny knack for
bringing the game alive
fascinating mathematical questions he explores.
He gets inside professional sports like no other writer I know.
Mathletics is like a seat at courtside.”
Mark Cuban, owner of the Dallas Mavericks
» Order Mathletics from Amazon.com
"Integrated Project Risk Analysis - Structuring the Model Effectively”
Presented by Jay O'Connor, Director, Turner & Townsend Inc.
December 3, 2009, 11:00am ET
A project risk analysis is only as good as the model that was used to prepare it. It is critical that the model be constructed to reflect the risks specifically associated with the project. The model must be able to accurately reflect the risks associated with schedule, quantities, cost and the residual unmitigated risk items from the qualitative risk analysis. The model should also take into account the interrelationships and dependencies of these items.
This webcast will address these issues and present examples of how results can vary based on the level of detail used in preparing the risk analysis, and will include the use of @RISK, and @RISK for Project.
» Register now (There is no charge for this webcast.)
Palisade Blog Headlines
Allocating Contingencies to Risk Events
that were identified
in a Risk Register
Friday, October 30, 2009
In a previous blog, Dr. Javier Ordoñez presented a simple way to allocate contingencies to uncertain cost elements in the project risk management process. That methodology works well when there are not risk events that affect a cost element or a group of cost elements. A risk event is described by two elements: the probability of occurrence and the conditional impact to the project given its occurrence...
» Read more
Wine Aficionado? Six Sigma expert? or both?
Tuesday, October 27, 2009
I’ve heard of Six Sigma being used in every industry from manufacturing, banking, even baking, but now... wine making? Just the other night I discovered a winery that is using Six Sigma principles to ensure they are producing the highest quality wine available...
» Read more
Subscribe to the Palisade blogs.
FiduciaryVest Uses @RISK
for Asset Allocation Modeling
Decision makers for all long term investment pools face a critical challenge, regardless of their level of sophistication: Multi-year allocation among the various asset categories available to investors. This particular decision is known to be the primary factor that will determine long-term portfolio outcomes. Adequate investment management within the underlying asset class is actually a secondary issue. That being said, the inherent question is: How can asset allocation decisions be made with strong confidence that the outcomes will be appropriate to a particular client’s desired/expected financial needs? FiduciaryVest uses @RISK to help answer this question. According to FiduciaryVest’s Joe Dinunno, “Using @RISK to get answers to these types of questions helps us give clients real-world insight into what to expect from their portfolio.”
» Read the full case study
Percentile Distribution Parameters
The use of traditional parameters in defining distributions can be difficult to estimate and challenging for people to understand. Estimating the mean and standard deviation of the normal distribution which describes uncertain demand, for example, is not intuitive to many managers.
@RISK allows you to define distribution functions using percentiles instead, which are a more natural way. People can estimate, say, what a 10% chance outcome will be, or a 90% chance value.
This model demonstrates the use of the alternate parameter formulation. In this case we assume that we have decided to use a Normal distribution to represent the arrival time of someone at work. The use of traditional parameters would require knowledge of the standard deviation of the arrival time, which may be hard to estimate. In the first case, the traditional parameters are used (mean and standard deviation). In the second case, the mean is still used, and the P90 is used in place of the standard deviation, i.e. the time before which the person arrives in 90% of cases. In the second case, the P10 and the P90 is used in place of the standard deviation i.e. the time before which the person arrives in 10% of cases, and in 90% of cases respectively.
Download the example: AltPars.ArrivalTime.xls
Even Small Energy Cuts Can Minimize Climate Risk
Technique: Decision Analysis » see DecisionTools Suite 5.5
Source: Scitizen.com, October 9, 2009
A decision analysis study from MIT finds that relatively even relatively small energy conservation measures taken right away could help stabilize global climate.
'Snap' Decisions May Be Just as Effective as Deliberation
Technique: Decision Trees » see PrecisionTree 5.5
Source: SmartPlanet.com, August 24, 2009
As an example how simplifying information input can create efficiency, a Chicago emergency room moved to a faster simpler decision tree and over a two-year period saw a 70-percent rise in successful diagnosis and treatment of heart attacks.
Why Social Cues Confuse Babies and Dogs
Technique: Neural Networks » see NeuralTools 5.5
Source: EurekAlert, September 24, 2009
Using neural network models, psychologists demonstrated that ordinary distraction accounts for babies' poor performance in classic test.