More Related Content Similar to Impact of Changing World Politics in Managing Risk (20) Impact of Changing World Politics in Managing Risk4. 1. Major reduction in Regulatory Authority
2. Increase in USA Military Strength
3. Return of USA to Space Exploration
4. Resumption of USA Commercial Leadership
5. Elimination of Political Correctness
6. Restoration of Judeo-Christian Values
©VLG
Likely TRUMPTRUMP Changes
5. ©VLG
• Cancelled US regulations may increase risk of higher crime rates
• Increased US military strength could mean reordered budget as well as force employed
elsewhere
• Re-entry in space exploration will shift US competition internationally
• Trump resumption of abandoned US world leadership will affect import-export traffic
• Overthrown Political Correctness will enhance foreign trade
• US return to Judeo-Christian values will impact conduct of business
6. INTERNATIONAL ASPECT OF MANAGING RISKINTERNATIONAL ASPECT OF MANAGING RISK
•Interdependent global economy nature of risk
•Distribution of shared risk is unequal
•Existing world relationships may be upset by Trump
changes
•Current risk management techniques may prove
inadequate
•Universal understanding and agreement about risk will
be required
•Universal agreement on managing risk raises
questions
ESSENTIAL STEPS TO MANAGING RISKESSENTIAL STEPS TO MANAGING RISK
•Trump unpredictability drives the need for basicTrump unpredictability drives the need for basic
approach for practical management of riskapproach for practical management of risk ©VLG
8. ©VLG
• Three important questions about LOSS
need to be answered
• There must be means or technique to
foresee, prevent, and manage losses
• Methodology that provides ability to
identify, evaluate, and rank loss potential
is essential to managing losses
10. ©VLG
• Risk requires universalRisk requires universal definitiondefinition
• Managing risk meansManaging risk means focus on lossfocus on loss
12. ©VLG
CURRENT APPROACHES to RiskCURRENT APPROACHES to Risk
ManagementManagement
Our 2009 RISK MANAGEMENT REPORTS treatise,
“Enterprise Risk Management – Its Five Biggest
Weaknesses” outlines strategy for attaining a
universal approach to managing risk
All five weaknesses still exist and must be overcome!
(Visit www.omegainc.com for details)
13. ©VLG
Risk Management SPECTRUMRisk Management SPECTRUM
UNACCEPTABLE LOSS
(Financing Unthinkable)
Loss Financing
ACCEPTABLE LOSS
(Control Impossible)
Loss Control
ROOTS
Insurance
Financial Management
Legal Counsel
ROOTS
Society & Security
National Prestige
Environmental Protection
Personal Health
14. ©VLG
• There is a wide spectrum of risk management
activity – ranging from loss financing (insurance)
to loss control (specific loss countermeasures).
• Comprehending these opposing risk management
poles – loss financing v. loss control – and their
associated contrasting view of LOSS is essential to
surviving any and all Trump changes.
• The impact of specialties – known as “silos” – on
managing risk is a danger to be overcome. This is
even true for individual risk specialties themselves
16. • Diverse definitions of risk
• Unbalanced emphasis on perceived risk
• Disconnection from corporate risk strategy
• Failure to comprehend risk interdependence
• Counterproductive inefficiency of risk control
©VLG
FUNCTIONAL SPECIALTY INFLUENCEFUNCTIONAL SPECIALTY INFLUENCE
on Managing Risk
17. ©VLG
•There are only three available options for identified
losses – prevent some, accept others, or obtain
reimbursement for the remainder.
•Insurance companies have never managed risk – they
only finance it.
•Contrast between insurer and insured has high
significance because it affirms that LOSS – rather
than RISK – must be the focus and concern of every risk
manager.
•Loss is not the only financial factor in managing risk –
countermeasure cost is a major expenditure.
•Four fundamental tasks must be executed by a risk
manager.
18. INVOLVINGINVOLVING YOURYOUR PERSONNELPERSONNEL
INSTEAD OFINSTEAD OF OUTSIDERSOUTSIDERS
Managing risk is anManaging risk is an ““insider jobinsider job”” –– performedperformed
by those most familiar with the values, needs,by those most familiar with the values, needs,
history, pressures, skills, and motivationshistory, pressures, skills, and motivations
possessed by everyone in the organization forpossessed by everyone in the organization for
which risk is being managed.which risk is being managed.
©VLG
19. ©VLG
Foreseeing and Identifying RiskForeseeing and Identifying Risk
PriorPrior to Impactto Impact
SMARTTM
(Systems Methodology Applied to
Risk Termination) – which has
demonstrated wide success in business,
government, transportation, health care
as well as controlling terrorism at the
1984 Olympics — is employed as a
model.
(see www.omegainc.com)
20. 1. Define KNOWN INPUTS and DESIRED OUTPUTS of “system”
2. Build FUNCTIONAL FLOW BLOCK DIAGRAM (FFBD) of “system”
3. Write RISK SCENARIOS for every block in FFBD
4. Prepare COUNTERMEASURES for every risk scenario
5. Determine full COST of every countermeasure
6. Set SCENARIO CRITERIA for severity, probability & countermeasure cost
7. Establish RISK JURY to evaluate each scenario against criteria
8. Assemble all judged scenarios into a RISK TOTEM POLE
9. Implement RISK CONTROLS for significant risks
10. Keep Risk Totem Pole UP-TO-DATE
SMART in 10 Steps
Systems Methodology Applied to Risk Termination
©VLG
TM
TM
TM
21. A COMPOSITE – at any level of complexity –
of operational and support equipment, personnel,
facilities and software which are used together
as an entity and capable of performing and/or
supporting an operational role that results in changing
KNOWN INPUTS into DESIRED OUTPUTS
©VLG
DEFINITION OF SYSTEMDEFINITION OF SYSTEM
22. ©VLG
THE SYSTEMS APPROACHTHE SYSTEMS APPROACH
SYSTEM
as a
TRANSFORMER
KNOWN
INPUTS
“Transforming
KNOWN INPUTS into DESIRED OUTPUTS
by utilizing RESOURCES”
DESIRED
OUTPUTS
FEEDBACK LOOP
23. • Virtually anything can be a system – starting with a simple cup of
coffee which has known inputs and desired outputs.
• As a transformer of known inputs into desired outputs, a system
uses all types of resources – finances, facilities, time, personnel,
space, knowledge, and equipment.
• A feedback loop – from desired outputs to desired inputs – assures
that lessons learned are incorporated.
©VLG
24. • SMART’sTM
Ten Progressive Steps are required
to cost-effectively manage any and all
imaginable risks by using the systems
approach.
• Two steps (3 and 7) of this “womb-to-tomb”
approach that was essential to landing men
on the Moon will be described in detail.
(see www.omegainc.com)
©VLG
25. • SMARTTM
Step 3: Write Risk Scenarios discusses the risk
identification element of managing risk systematically.
• A scenario for an imaginary US corporation – Omega Widget
Industries – illustrates how all the required elements – man,
machine, media, and management – are integrated into a story
culminating in a hypothetical financial loss.
• Stimulation for writing a scenario can start by observing an actual
incident of loss but it also often involves imagination. Expert
insight as well as history of losses are additional scenario sources.
©VLG
26. • Brief description of combined CAUSATIVE FACTORS
that form an “anatomy of accidental loss”
•Interrelates ingredients of
MAN (behavior)
MACHINE (physical phenomena)
MANAGEMENT (situational decisions)
MEDIA (environmental milieus)
•Not literary entertainment – but HIGHLIGHTED and
INTEGRATED elements of loss
What is a RISK SCENARIO?What is a RISK SCENARIO?
©VLG
27. ©VLG
THREE TIERS OF QUESTTHREE TIERS OF QUEST
For Risk ScenariosFor Risk Scenarios
IMAGINATION
EXPERT INSIGHT/ADVICE
HISTORY
28. During the final stage of Widget X production at Omega Widget Industries (OWI),
flywheel assemblies begin failing. Quality Control inspectors reject end product at much
higher levels than acceptable. Flywheels are imported, and the outsourced supplier has
made budget cuts to adjust to the Border Adjustment Tax implemented by the Trump
Administration.
Anticipating this possibility, OWI executives immediately engage a previously
qualified US supplier – Second Chance Incorporated – as backup. However, due in part to
Trump deregulated oversight and enforcement at OSHA and EPA, Second Chance is
experiencing a surge in criminal investigations and lawsuits from employees, local residents,
and customers. Social media effectively eliminate Second Chance as a fallback supplier.
Production at OWI is reduced to 20% of capacity for several months, as
shareholders begin calling for a management change. New media exploit the impact of the
shutdown on area employment and OWI’s previously stellar corporate reputation.
Estimated loss is $750 million.
©VLG
TYPICAL RISK SCENARIOTYPICAL RISK SCENARIO
29. RISK JURY MEMBERSRISK JURY MEMBERS
•Line Executive – Chair
•Three Line Expert Specialists
•One Risk Generalist
©VLG
30. • SMARTTM
Step 7: Risk Jury -- the second of ten SMARTTM
steps to be described – establishes
a RISK JURY to evaluate each scenario against numerous criteria.
• Generally, a Risk Jury consists of five members – all of whom have been selected by the
CEO in whose interest they judge.
• Only insiders – personnel who are daily involved in and responsible for the operation of the
organization – can be trusted to exercise the judgment necessary to evaluate and resolve
the true significance of every risk scenario.
©VLG
31. • Pursued within a Logical
“Eliminate-Automatic-Warning-Procedural” Framework
• Something not currently being done
• Total cost must be determinable
©VLG
MULTIPLE COUNTERMEASURESMULTIPLE COUNTERMEASURES
For Every Risk ScenarioFor Every Risk Scenario
32. • The Risk Jury – after determining each scenario’s
severity and likelihood as well as selecting among
proposed countermeasures how it will be
controlled, is able to establish all information
required to place it accurately in the Risk Totem
PoleTMTM
.
• Four options exist for controlling each scenario.
The Risk Jury decides which option is applied to
each scenario.
©VLG
33. • The crowning feature of SMARTTM
is its Risk Totem PoleTM
– a ranked mathematical ordering of all identified risks.
It is the product of collective Risk Jury decisions.
• There will always be limited corporate resources for
controlling risk losses. So every Risk Totem PoleTM
is
divided into two parts.
• To assure that vital risk control resources are most
cost-effectively invested, risk scenarios at the top of the
pole are the most severe, most probable, and requiring
the least expensive countermeasures to eliminate them.
• A cutoff of funding in the pole marks the full
expenditure of the loss prevention budget – thereby
necessitating acceptance of risks of lesser consequence.
• At the bottom of the Risk Totem PoleTM
are risk
scenarios that are least severe, least probable and
most expensive to eliminate.
©VLG
35. TOWARDTOWARD Managed Risk!Managed Risk!
• Managing risk systematically with foresight – as
demonstrated by SMARTTM
– provides a stable framework
with a thorough array of foreseen risks that are ranked
for cost-effective control.
•It is time to be sensible, to organize, and to become
systematic! Managing risk is not mysterious. Avoid clever
clichés or bewitching buzzwords.
•Above all, be prepared to successfully manage any and
all potential risks that may emanate from Trump
Administration changes!
(Visit www.omegainc.com)
©VLG
36. ATTAININGATTAINING Managed Risk!Managed Risk!
•Managing risk will continue to be a challenge forManaging risk will continue to be a challenge for
management.management. Risk can never be ignoredRisk can never be ignored – even– even
when it is well controlled.when it is well controlled.
•What would be required toWhat would be required to justifyjustify the conclusionthe conclusion
that your organization had attained a state ofthat your organization had attained a state of
managedmanaged risk?risk?
• Uncertainty seems to drive or dominate so muchUncertainty seems to drive or dominate so much
business in the world today. Terrorism appears tobusiness in the world today. Terrorism appears to
have attained a permanent role throughout thehave attained a permanent role throughout the
world. And, yes,world. And, yes, Trump has begun to upsetTrump has begun to upset
previous expectancies of business and commerceprevious expectancies of business and commerce..
©VLG
38. ISO 31000 Training Courses
ISO 31000 Introduction
1 Day Course
ISO 31000 Foundation
2 Days Course
ISO 31000 Risk Manager
3 Days Course
ISO 31000 Lead Risk Manager
5 Days Course
Exam and certification fees are included in the training price.
www.pecb.com | https://pecb.com/events