Creating value with riskope ore 31 10_2012

Optimum Risk Estimates (ORE)Optimum Risk Estimates (ORE)®® will help you steering your organization. will help you steering your organization.

(c)Oboni Riskope Associates Inc. (c)Oboni Riskope Associates Inc. www.riskope.comwww.riskope.com foboni(a)riskope.com Page foboni(a)riskope.com Page 11 of of 2424 12/10/2012 12/10/2012

Creating Value in your CompanyCreating Value in your Companybyby

Strategic Integration of Strategic Integration of Knowledge and Risk LandscapeKnowledge and Risk Landscape

UsingUsingOptimum Risk Estimates (ORE)Optimum Risk Estimates (ORE)®®

Franco Oboni & Cesar OboniFranco Oboni & Cesar OboniOboni Riskope Associates Inc., Oboni Riskope Associates Inc.,

Vancouver, British Columbia, CanadaVancouver, British Columbia, Canada

http://www.riskope.com/



Companies interpreted the Companies interpreted the results of Risk Assessments results of Risk Assessments with fuzzy Probabilities-with fuzzy Probabilities-Impact (Losses) Graphs Impact (Losses) Graphs (PIGs) which often were (PIGs) which often were misleading and did not misleading and did not really promote or increase really promote or increase an holistic understanding of an holistic understanding of the business' environment.the business' environment.

Risk Management used to be a “Compliance” Risk Management used to be a “Compliance” or “Loss Minimization” afterthought, not a or “Loss Minimization” afterthought, not a Value Creation tool.Value Creation tool.




Using PIGs Using PIGs generates risks, generates risks, instead of instead of solving your solving your Business Business problems: this is problems: this is a real PIG from a real PIG from a large project a large project Risk Risk Assessment.Assessment.

PIGs became ubiquitous, despite intrinsic PIGs became ubiquitous, despite intrinsic conceptual errors, with potential dramatic conceptual errors, with potential dramatic negative consequences on their users.negative consequences on their users.

Probabilities and ConsequencesProbabilities and ConsequencesAre Poorly Defined, Arbitrarily Are Poorly Defined, Arbitrarily and Wrongly Scaled! Risks areand Wrongly Scaled! Risks areMisrepresented!Misrepresented!




To prove how misleading PIGs can be, look at To prove how misleading PIGs can be, look at some historic and recent sets of tolerability some historic and recent sets of tolerability criteria & real probability-consequences data...criteria & real probability-consequences data...




We can fore-We can fore-see that see that cases will be cases will be challenged challenged in Courts of in Courts of Law against Law against companies companies using PIGs using PIGs for their for their risk asse-risk asse-ssments and ssments and the resulting the resulting decisions.decisions.

...and plot the PIG on top, discrepancies ...and plot the PIG on top, discrepancies become evident, misrepresentation is blatant!become evident, misrepresentation is blatant!




Let's guess, your car has a Let's guess, your car has a better cockpit than this old better cockpit than this old clunker!clunker!Modern cars have more Modern cars have more sophisticated instruments, sophisticated instruments, right?right?

However, in your company However, in your company you probably still use this you probably still use this PIG matrix as a RM/ERM PIG matrix as a RM/ERM cockpit.cockpit.At Riskope we believe your business deserves At Riskope we believe your business deserves better than this rudimentary, obsolete tool! Manage better than this rudimentary, obsolete tool! Manage it using all available information...read further!it using all available information...read further!




From the early '90s on clients started From the early '90s on clients started asking for real asking for real MEASUREMENT OF RISK.MEASUREMENT OF RISK.

They understood that bringing risk They understood that bringing risk management in, even at (Pre) Feasibility management in, even at (Pre) Feasibility Stage, would Stage, would CREATE VALUECREATE VALUE. . They are starting now to look at They are starting now to look at STRATEGIC INTEGRATION OF RISK.STRATEGIC INTEGRATION OF RISK.

There was There was no chance that a flawed, no chance that a flawed, simplistic, misrepresenting PIG would simplistic, misrepresenting PIG would bring them satisfying repliesbring them satisfying replies...Riskope ...Riskope had to start building innovative solutions.had to start building innovative solutions.




From the end of the '90s we started using ORE v.1.0From the end of the '90s we started using ORE v.1.0 allowing explicit measures & uncertainties thanks to allowing explicit measures & uncertainties thanks to the “bubbles”.the “bubbles”.Instead of Instead of arbitrary arbitrary Indexes we Indexes we usedused real realvaluesvalues, we, weintroduced introduced explicitly explicitly defined defined Client's Client's tolerability tolerability thresholds,thresholds,

enabling the measurement and understanding ofenabling the measurement and understanding ofthe holistic Business risks environment...the holistic Business risks environment...




Lets' summarize Lets' summarize PIGs characteristics and see PIGs characteristics and see how the latest versions of ORE solve themhow the latest versions of ORE solve them::-Arbitrary selection of cell limits, EliminatedEliminated

-Arbitrary selection of “coloring” frontiers, EliminatedEliminated

-Simplistic definition of consequences, solvedsolved by by generating wide spectrum Consequence functionsgenerating wide spectrum Consequence functions-Lack of “resolution” between risks, EliminatedEliminated

-Fuzzy results, poor decision making support, EliminatedEliminated

We will now see the advantages brought in by Ore We will now see the advantages brought in by Ore deployment...deployment...




Case Study 1Case Study 1

We will use, for this first Case Study, Operation We will use, for this first Case Study, Operation Ten (OT) belonging to our client AAA Inc. (AAA) Ten (OT) belonging to our client AAA Inc. (AAA) (names, locations and risk names have been (names, locations and risk names have been altered to respect client's confidentiality), a altered to respect client's confidentiality), a medium sized business. Geographic location, medium sized business. Geographic location, business type and product(s) do not matter for business type and product(s) do not matter for this discussion.this discussion.

They had prepared a PIGThey had prepared a PIG........




Using common procedures and Using common procedures and instructions for the definition of instructions for the definition of probabilities/frequencies and probabilities/frequencies and consequences.consequences.Class Class Frequency of Failure Frequency of Failure

11 1 in over 100 years1 in over 100 years22 1 between10 to 100 years1 between10 to 100 years33 1 between 5 to 10 years1 between 5 to 10 years44 1 between 1 to 5 years1 between 1 to 5 years55 more than 1 failure per yearmore than 1 failure per year

ClassClass Severity Severity11 $0 to $1,000,000 in costs$0 to $1,000,000 in costs22 $1,000,000 to $5,000,000 in costs$1,000,000 to $5,000,000 in costs33 $5,000,000 to $15,000,000 in costs$5,000,000 to $15,000,000 in costs44 $15,000,000 to $50,000,000 in costs$15,000,000 to $50,000,000 in costs55 more than $50,000,000 in costsmore than $50,000,000 in costs




They defined 50 risks which split into:They defined 50 risks which split into: -0 Severe-0 Severe-14 High-14 High-25 Medium -25 Medium -11 Low risks-11 Low risks

They called Riskope in to help because They called Riskope in to help because they did not know how to tackle 14 they did not know how to tackle 14 high, 25 medium...too fuzzy, too high, 25 medium...too fuzzy, too costly!!! costly!!!




Riskope deployed ORE (Optimum Risk Estimates) as Riskope deployed ORE (Optimum Risk Estimates) as Riskope teaches in short courses all over the world.Riskope teaches in short courses all over the world.

ORE is the result of twenty years experience world-ORE is the result of twenty years experience world-wide and has been deployed for various clients, wide and has been deployed for various clients, including Fortune 500 at various stages including including Fortune 500 at various stages including acquisitions, pre-feasibility, operations, changes.acquisitions, pre-feasibility, operations, changes.

We will now see how ORE help formulating strategic We will now see how ORE help formulating strategic and tactical plans, increase to get a clearer roadmap and tactical plans, increase to get a clearer roadmap for managing, decision making, etc...for managing, decision making, etc...




Let's build a Tolerability Curve: we display it here on Let's build a Tolerability Curve: we display it here on top of the original client's PIG's cells, for comparison.top of the original client's PIG's cells, for comparison.

A specific Tolerability A specific Tolerability Curve exists for any Curve exists for any project, operation, project, operation, company. company.

NB: if uncertainties are NB: if uncertainties are included then you'd see included then you'd see a band instead of a line, a band instead of a line, and risks would be and risks would be plotted as “bubbles”, on plotted as “bubbles”, on this p-C diagram.this p-C diagram.




For each risk let's evaluate the intolerable For each risk let's evaluate the intolerable part (orange) v.s. tolerable part (blue).part (orange) v.s. tolerable part (blue).




Top 20 Total Risks Top 20 Total Risks prioritizationprioritization. However, . However, we can do better than that! we can do better than that!




The best Risks prioritization is based on the The best Risks prioritization is based on the intolerable part as discriminant. It constitutes intolerable part as discriminant. It constitutes the core of ORE because...the core of ORE because......the only risks that ...the only risks that actually matter for your actually matter for your company are the ones company are the ones that extend above the that extend above the Tolerability Criteria Tolerability Criteria created for your specific created for your specific project/operation/ project/operation/ company.company.




ORE show that in this ORE show that in this Case only 5 scenarios Case only 5 scenarios count for 83% of the count for 83% of the total intolerable risks. total intolerable risks. Concentrating on them Concentrating on them will greatly improve will greatly improve the situation.the situation. Five instead of 14 Five instead of 14 (+25) suggested by (+25) suggested by PIG.PIG.

Now it is possible to take rational decisions in allotting mitigative funds, planning ahead!




Case Study 2Case Study 2

We will use, as a second case study, a diversified We will use, as a second case study, a diversified producer of equipment and service company. producer of equipment and service company. Again, names, locations and risk names have Again, names, locations and risk names have been altered to respect client's confidentiality. been altered to respect client's confidentiality. This is a complex international business producing This is a complex international business producing in three different countries and delivering to many in three different countries and delivering to many more. Geographic location, business type and more. Geographic location, business type and product(s) do not matter for this discussion.product(s) do not matter for this discussion.

They had always used PIGsThey had always used PIGs........




...but realized that:...but realized that:

PIGs are PIGs are too limited to evaluate all risks – whereas too limited to evaluate all risks – whereas ORE is a broad based risk assessment tool, used ORE is a broad based risk assessment tool, used globally and based on actual activity, results, and globally and based on actual activity, results, and data available, compliant with ISO 31000.data available, compliant with ISO 31000.

Furthermore they recognized that Riskope has Furthermore they recognized that Riskope has unique academic preparation, experience, & unique academic preparation, experience, & research & application of Risk Assessment world-research & application of Risk Assessment world-widewide

Riskope deployed ORE...Riskope deployed ORE...




These pictures are another These pictures are another example of ORE results example of ORE results displaying toolsdisplaying tools




But the most comprehensive is a ORE Cockpit. But the most comprehensive is a ORE Cockpit. Acme Inc.4 Divisions: A,B,C,D;Diversified3 countries;International Exports.

Sources of Threats Sources of Threats

Media VulnerabilityMedia Vulnerability

Potential Losses per ProductPotential Losses per Product

Hazardous SectorsHazardous SectorsLogistic Risks Logistic Risks




.... I want to express my gratitude for all of the time and effort you have put in .. I want to express my gratitude for all of the time and effort you have put in before and during the ... hearings.before and during the ... hearings.

... I very much enjoyed getting to work with you in person, and have tried to ... I very much enjoyed getting to work with you in person, and have tried to learn as much I can from your and Cesar's approach, reasoning, and methods. learn as much I can from your and Cesar's approach, reasoning, and methods.

It has been a real treat for me. I believe you have offered a perspective unlike It has been a real treat for me. I believe you have offered a perspective unlike any other experts we have had. any other experts we have had.

……..lots of challenges, so again thank you for your endless help...lots of challenges, so again thank you for your endless help.

...Riskope's results are irrefutable, transparent, fact-based. ...Riskope's results are irrefutable, transparent, fact-based.

...Rigourous development coming from a group with solid real-life experience and ...Rigourous development coming from a group with solid real-life experience and outstanding theoretical skills.outstanding theoretical skills.

...Riskope is never boxed in the “let's do like all the others” scheme. On the ...Riskope is never boxed in the “let's do like all the others” scheme. On the contrary, they always seek the development of tools matching exactly clients' contrary, they always seek the development of tools matching exactly clients' needs and requirementsneeds and requirements

What Clients Say about Riskope. What Clients Say about Riskope.




CONTACT: Franco Oboni CONTACT: Franco Oboni foboni(a)riskope.comfoboni(a)riskope.com

ORE are the key ORE are the key to your business to your business prosperity, prosperity, survival and survival and sustainability.sustainability.

With Riskope With Riskope and ORE you and ORE you can “drive” can “drive” safely towards safely towards your goals.your goals.
