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2010 –BP….DEEPWATER HORIZON - RIMS How Well... · EMERGING RISK MANAGEMENT % OF CAEs/DIRs. ......
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Transcript of 2010 –BP….DEEPWATER HORIZON - RIMS How Well... · EMERGING RISK MANAGEMENT % OF CAEs/DIRs. ......
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2010 – BP….DEEPWATER HORIZON
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2010 – BP….DEEPWATER HORIZON
THEY MISSED…..
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2011 – FUKUSHIMA NUCLEAR REACTOR
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2011 – FUKUSHIMA NUCLEAR REACTOR
THEY MISSED…..
INCLUDING A TSUNAMI IN
THEIR DISASTER SCENARIO
…..BECAUSE THE LAST
TSUNAMI WAS 1000 YEARS
AGO!
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2013 – NOKIA….“SCRAPPED”?
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2013 – NOKIA….“SCRAPPED”?
THEY DIDN’T SEE THIS COMING…..
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2016 – YAHOO!.....MISSED THE BUS2008
MICROSOFT
OFFERED
$40BN FOR
WEB
BUSINESS
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2016 – YAHOO!.....MISSED THE BUS
THEY DIDN’T SEE THIS COMING…..
MOBILE-FRIENDLY INTERNET
SOCIAL NETWORKING
MESSAGING
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2016 SURVEY
0 20 40 60
COPING WELL
BIGGESTCHALLENGE
EMERGING RISK MANAGEMENT
% OF CAEs/DIRs
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WHAT ARE WE GOING TO TALK ABOUT
1. The concept of Emerging Risk
Is it any different from a Conventional or Familiar
or Current Risk ?
2. How do risks emerge ? What are the Contributing
Factors ?
3. Identify Emerging Risks on your horizon
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WHAT ARE WE GOING TO TALK ABOUT
4. High Level Components of the Emerging Risk
Governance Framework [ERGF]
5. Risk Analysis in Conventional Risk Mgmt vs.
Emerging Risk Mgmt
6. Emerging Risks Identification & Mgmt System
[ERIMS]
Decision Science
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DEFINITION OF RISK
RISK (AND OPPORTUNITY) IS THE POSSIBILITY THAT AN
INCIDENT, ARISING FROM INTERNAL OR EXTERNAL
SOURCES, WILL OCCUR AND ADVERSELY (FAVORABLY)
AFFECT THE ACHIEVEMENT OF THE ENTITY’S
OBJECTIVES.
- COSO 2013
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DEFINITION OF RISK
RISK = POSSIBILITY OF AN OBJECTIVE-DISRUPTING
EVENT OCCURRING (EVENT HAS NOT YET OCCURRED)
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JUST AS “I AM BECAUSE I THINK”
SO ALSO: RISKS COME ALIVE ONLY BECAUSE OF
OBJECTIVES
NO OBJECTIVES, NO RISKS TO WORRY ABOUT !!
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JUST AS: RISKS COME ALIVE BECAUSE OF
OBJECTIVES
SO ALSO: EMERGING RISKS COME ALIVE ONLY
BECAUSE OF OBJECTIVES
NO OBJECTIVES, NO EMERGING RISKS TO WORRY
ABOUT!!
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DEFINITIONS OF EMERGING RISK
EMERGING RISK IS A NEWLY DEVELOPING OR
CHANGING RISK, THAT IS DIFFICULT TO QUANTIFY,
BUT COULD HAVE A MAJOR IMPACT ON SOCIETY /
INDUSTRY.
- SWISS RE
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SO IN WHAT WAY ARE EMERGING RISKS
DIFFERENT FROM CURRENT /
CONVENTIONAL RISKS ?
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CURRENT RISKS EMERGING RISKS
1. UNCERTAIN LIKELIHOOD ----------DITTO---------- X 100
2. UNCERTAIN FREQUENCY ----------DITTO---------- X 100
3. UNCERTAIN TIMING ----------DITTO----------- X 100
4. UNCERTAIN IMPACT ----------DITTO---------- X 100
5. UNCERTAIN DURATION (OF IMPACT) ----------DITTO---------- X 100
6. UNCERTAIN VELOCITY ----------DITTO---------- X 100
7. UNCERTAIN VULNERABILITY ----------DITTO---------- X 100
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NEVER THINK EMERGING
RISKS ARE ALWAYS AS
SLOW AS THIS
SOMETIMES THEY COULD
BE AT YOUR DOORSTEP
AS FAST AS THIS !!
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WHAT FACTORS
“FERTILISE THE
SOIL” FROM
WHICH EMERGING
RISKS SPROUT?
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1. COMPLEX
SYSTEMS
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GREENHOUSE
GAS EMISSIONS:
AMPLIFICATION
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GGEGLOBAL
WARMING
PERMA
FROSTTROPICAL
FOREST
POLAR
ICE
CAPS
GLOBAL WARMING X 2
CLIMATIC NATURAL
DISASTERS (ER)
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3. CLOSELY
INTERCONNECTED
COMPONENTS
- MEGACITIES
CRASHING
INFRASTRUCTURE (ER)
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7. UNTESTED
TECHNOLOGY
- HYDRAULIC
FRACKING
LARGE SCALE
GROUND WATER
CONTAMINATION(ER)
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10. PERVERSE
INCENTIVES
- PERFORMANCE
BONUSES
FINANCIAL CRIME,
FINANCIAL SYSTEM
INSTABILITY(ER)
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EMERGING RISK
GOVERNANCE
FRAMEWORK (ERGF)
1. Risk Governance
2. Risk Culture
3. Training
The ER Co-ordinator’sRole in the ERGF
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WHAT HAVE WE TALKED ABOUT TILL NOW
1. The concept of Emerging Risk
Is it any different from a Conventional or Familiar
or Current Risk ?
2. How do risks emerge ? What are the Contributing
Factors ?
3. Identify Emerging Risks on your horizon
![Page 31: 2010 –BP….DEEPWATER HORIZON - RIMS How Well... · EMERGING RISK MANAGEMENT % OF CAEs/DIRs. ... Identify Emerging Risks on your horizon. WHAT ARE WE GOING TO TALK ABOUT 4. High](https://reader031.fdocuments.us/reader031/viewer/2022031008/5b9040de09d3f2c1498bad89/html5/thumbnails/31.jpg)
WHAT HAVE WE TALKED ABOUT TILL NOW
4. High Level Components of the Emerging Risk
Governance Framework [ERGF]
5. Risk Analysis in Conventional Risk Mgmt vs.
Emerging Risk Mgmt
6. Emerging Risks Identification & Mgmt System
[ERIMS]
Decision Science
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EMERGING RISK
IDENTIFICATION
&
MANAGEMENT
SYSTEM
(ERIMS)
1. Detect & Explore Early Warnings
2. Develop Scenarios
3. Brainstorm Scenarios & RM
choices, and Decide which to pursue
4. Implement choices decided in
Step 3
5. Monitor Implementation in
Step 4, Review Decisions taken in
Step 3
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1. EARLY WARNINGS
SCAN THE HORIZON
DETECT WEAK SIGNALS
EXPLORE POSSIBLE
FUTURE DANGERS
CREATE RISK PROFILE
PRELIMINARY LIST OF
EMERGING RISKS &
OPPORTUNITIES FOR
SCENARIO BUILDING
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2. SCENARIO BUILDINGER1 = Emerging Risk #1,
arises in 4 scenarios SC1 to
SC4
SC1 = Scenario #1, which
comprises a sequence of
events E1, E2, E3 and E4…….
SC4 = Scenario #4, which
comprises a sequence of
events E1, E5 and E12SC4 is a Black Swan scenario (CATASTROPHIC
Impact, almost 0 likelihood, no previous occurrence)
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3. DECISIONS – SCENARIOS TO PURSUE
Risk Mgmt Team has decidedto pursue Scenarios 1 and 4 as
they are considered critical for
managing the Emerging Risk #1
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3. DECISIONS – RISK MGMT OPTIONS
ACT ON CONTRIBUTING
FACTORS
AVOID THE RISK TOTALLY
REDUCE EXPOSURE &/OR
VULNERABILITY
RAISE RISK TOLERANCE
LIMITS
DO NOTHING
CONVENTIONAL RISK MGMT RESPONSES
(A,R,S,A)
FOR HANDLING SCENARIO 1,
DECIDE ON ONE OR MORE
OF THE OPTIONS TO YOUR LEFT USING THE BELOW FILTERS IF RELEVANT TO YOUR ORGANISATION:
MONETARY COST
SUSTAINABILITY
SOCIO-POLITICAL ACCEPTABILITY
ETHICS
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3. DECISIONS
• BOTH THE DECISIONS IN THE TWO PREVIOUS
SLIDES ARE MADE UNDER CONDITIONS OF
SIGNIFICANT UNCERTAINTY (WHICH IS THE
HALLMARK OF AN EMERGING RISK AS COMPARED
TO A CONVENTIONAL RISK)• DECIDING WHICH SCENARIOS TO PURSUE FOR MANAGING THE
EMERGING RISK, AND
• WITHIN THE SELECTED SCENARIOS, DECIDING WHICH IS THE
BEST RISK MGMT OPTION/S TO MANAGE THE RISK
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3. DECISIONS
• DECISIONS UNDER UNCERTAINTY ARE MADE
USING THE CONCEPT OF ROBUST DECISION
MAKING AS OPPOSED TO OPTIMAL DECISION
MAKING (Likelihood x Impact) UNDER
CONVENTIONAL RISK MGMT
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3. DECISIONS - ROBUST DECISION MAKING
• Consistency and rationality in the decision-making process
• All available information is considered
• Decision maintains enough flexibility for adaptation in the future, or
offers good performances for more than one future scenarios
• Decision is accepted by all parties involved, which requires
discussions between the parties
• Judgment is made by the decision-maker about the extent to which a
possible incorrect decision is likely to undermine the organization’s
economic performance, its reputation and overall benefit from the
decision