This is a sequel to our earlier presentation "Living dangerously:managing risks in business" and part of the Business Risk management Series. The Case Study of Risk analyses for the product launch for a soft drink brand shows the step by step analysis based on predictive analysis of variance in a given Risk.

1. Business Risk Case Studies Ba31
Laying down the framework of a Case study
Living Dangerously : Business Risk Management Series

2. De mystifying Risk
• Risk Management is not rocket science
• It is not finding the known, the unknown and the unknowable
• It is not quantifying the limitless
• It is not even, solving the Rubik’s cube
• It is at best complex predictive analytics
• It is a process of investigating, analyzing and breaking up multi-
dimensional variables into linear components, and measuring,
responding and mitigating the Risks.

3. Goal changing makes it easy to measure Risk
• Risk Management by TCM is not a new Risk theory
• Risk Management by TCM is merely an innovative application of existing
theories of risk to reach a desired conclusion.
• Risk management in TCM is done by goal changing.
• What was “Risk” in the classical theory is the “Risk Cause” in TCM
• What was “Risk Effect” in the classical theory is the “Risk” in the TCM
• The goal changing helps in easy measurement and quantification of Risk
• This is because the effect of any action like “price movement”, “supply delay”,
“failure of quality” or “incomplete construction” can be easily recorded and
measured, while the actions themselves may not be directly measurable.
• Hence Risk in TCM can be recorded and quantified.

4. Risk is the variance or volatility
• The “Risk Cause” is classified as “Expected” or “Unexpected” in the TCM
• Both “Expected” and “Unexpected” “Risk Cause” results in variance
• Variance is the measure of dispersion, the volatility around the mean value.
• This variance or volatility is the measure of Risk
• Since this variance happens all the time, Risk in TCM is a certainty that must
be continuously measured, monitored and controlled.

5. Identifying relevant predictors is the key
• To monitor and control variance or risk, the variable factors, that are likely to
influence future behavior or results, are first segregated
• This segregation and data pruning is done to narrow the number of variables
to a few relevant predictors based on which the risk response model is
formulated on the basis of variance observed and the risk cause identified.
• Such variance based prediction models may be based on a simple linear
equation or a complex neural network.
• This model is validated or even revised, periodically based on its Time Cycle
Module, which could be one week for projects and once a day or hour for
price movements.
• Predictive analytics used for managing risk in TCM is used in the field of
marketing, CRM, IT security, engineering, meteorology, and traffic planning.

6. Risk manager must have vertical knowledge
• Predictive analytics can be complex based on statistical modeling or
only checklist driven, both based on user experience
• In either case the predictive analyst must have both user experience
and insider knowledge of the vertical
• In both cases the model uses the same core principles of breaking
complex variables into simple linear equations, and measuring the
mean deviation, investigating the risk cause and planning the risk
response
• For example in insurance a customer’s, gender, age, occupation,
education, hobbies, and driving record are the relevant predictors
that would correctly predict the risk and the value at risk VaR in any
insurance policy

7. Risk Manager must have authority
• Risk manager must have seniority, experience and authority, and
need not be a statistical expert
• Risk management systems must be both dynamic and adaptive and
not static. Both models and predictors must be validated regularly.
• Risk management must be treated as a routine activity, not as a
one time check, with process interaction on a daily basis.
• Risk management, variance and predictive analysis were used even
before the IT age and discovery of statistical tools by using the first
principles, experience and human judgment.
• The case study of the product launch of the soft drink company
demonstrates how to risk manage based on first principles.

8. Risk management in TCM Case Study includes
• Laying down the framework Ba31
• Identifying boundary conditions & inputs required for analysis Ba 32
• Defining the time period of evaluation & repeatability checks Ba 33
• Specifying the qualitative aspects and terms of reference of
acceptable variance Ba 34
• Identifying the relevant predictors Ba 35
• Investigating the Risk cause Ba 36
• Measuring Risk and determining the Value at Risk Ba 37
• Formulating the Risk Response Ba 38
• Risk margin and transferring of Risk Ba 39
• Mitigating Threat by sacrificing Opportunity Ba 40

9. Laying down the framework ( Case Study )
• Case : : Risk Measurement for the product launch of an
aerated soft drink
• Project Name : Zephyr
• Vertical : FMCG
• Domain : Marketing & Advertisement
• Deliverable : Brand launch of a new soft drink
• Vehicle : Promotional campaign for the launch
• Association : Taste association with Brand name
• Taste : Tangy, “zyzy” taste at the tip of the tongue
• Campaign : A promotional campaign to match the unforgettable
zyzy” taste to create the Zephyr USP

10. Other Terms of reference
• Product Quality : A fizzy drink blended with a salt that is mildly
pungent and tickles (irritates) the skin at the
tongue tip for a few minutes. A matching
promotional campaign that creates the feel
• Project Cost : Launch cost USD 45 million
• Project Time : To kill point in 20 weeks
• Risk : Insignificant market response

11. Complex operational Risk with high Risk impact
• Insignificant market response is a Risk threatening both
the scope and the quality constraint of the Project. If the
market response is insignificant, both the product and the
project would have failed. It is the highest category of
Risk in its domain equivalent to a market crash, a grid
collapse or a total loss accident claim.
• Insignificant market response is an apparently non-
quantify-able risk. It has no direct relation to the variables
or the inputs to the project. In the next issue Ba32 in the
coming week we will see how this risk is demystified and
measured, and how the Risk causes are investigated.

12. The sequel
• This slide show is a sequel to our earlier presentation
• Living Dangerously :
Managing Risks in Business Ba01
It is part of the Business Risk management Series Ba 01……
Others in the pipeline are
• Series on Financial risks : Fa01…Series
• Series on Technology risks: Ta01…Series
• Series on Career risks: Ca01…Series

13. Reference Works
The Project Management Time Cycle – Vol. I
TIME CYCLE MODULE: From concept to feasibility
ISBN 1440493332 available at Amazon
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