Service Type: Enterprise Risk Management
Project: Enterprise Risk Management Program Design
Context:
Our client had only basic risk qualification measures and desired quantitative approaches. Risk management activities spanned an array of risk types and all business units. Operational risks were difficult to quantify and manage in addition to other risk types. Risk exposures were measured separately and not collectively, overlooking broader ERM impacts across the organization.
Approach & Results:
Approach: We developed an enterprise-wide risk measurement to enable the company to quantify the complete spectrum of risk types (e.g., financial, operational, strategic, and external) to allow for the integration and aggregation of risks into a single risk profile.
Results: Improved risk quantification, providing significant return on investment:
- Stochastic risk quantification model built on event trees which are logical diagrams showing causal chains of events leading to a risk occurrence and the subsequent chains of consequences.
- Probability distributions for severity and impacts developed by modeling historical data, where available and relevant, using a wide variety of distributions.
- What-if scenarios were built and sensitivity analyses performed for various risk response options.
