RISK MANAGEMENT AND MODELING
Measure what Matters, Make better Decisions
Enterprise risk management is a way organizations can identify, measure, assess, and mitigate risk. Unfortunately, the way risk management is performed today usually involves outdated, unscientific processes that are no better – and often worse – than gut feel. Hubbard Decision Research uses a proven risk management methodology that delivers an objective, scientific way to measure and valuate risk to help decision-makers make better decisions.
As stated in Doug Hubbard’s book The Failure of Risk Management, “The research is overwhelmingly conclusive – much of what has been done in risk management, when measured objectively, has added no value to the issue of managing risks. It may actually have made things worse.”
the problems with managing risk today
Believing that risk is an “intangible” and not something that can be measured;
Subscribing to methods that aren’t based on statistics or decision science;
Thinking that measurements of risk are insufficient because of small sample sizes or not enough data;
Depending on subjective judgments (such as with techniques like “weighted scoring”); and
Relying too much on experience and instinct when assessing risk instead of quantitative analysis.
In short, there are a lot of risks that can damage an organization – and the biggest one of them all is a weak RM approach.
exploring the foundations of effective risk control
- Identify Risks
- Quantify Value of Potential Losses
- Quantify Probability of Loss
- Determine Risk Tolerance
- Create a Tool for Doing the Math
- Decide and Act
- Measure Results and Evolve
By understanding and measuring uncertainty, an organization can gain valuable data that can inform decisions, which can then allow decision-makers to:
Decide whether to invest in getting more and often times different data;
Evaluate the likelihood that an event may happen or loss may occur;
Look for cost-effective ways to mitigate those risks; or
Assess if it makes sense to proceed with a decision given your stated risk tolerances and level of uncertainty.
A scientific process removes or mitigates human bias. The right strategy can do something most organizations struggle with: proving that their risk management efforts actually work.
Using a proven rm method: applied information economics
Contact HDR today to set up your consulting and quantitative risk assessment.