Catastrophic Risks

8/12/2019 Catastrophic Risks

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Catastrophic Risks

Are there Gaps in YourRisk Management Strategies?

Proudly Presents

Mark Aiello

Marsh Risk Consulting


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Overvie

! "e#ining Catastrophic Risk

! Accepting the Potential

! Measuring Catastrophic Risk

! Managing Catastrophic Risk
http://rimscanadaconference.ca/


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$% "e#ining Catastrophic Risk


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&hat is Catastrophic Risk?

'o is a catastrophic event typically de#ined?

Common Descriptors

Global Disaster

Tragedy

Natural hazard

Accident Etc.

Common Events

Earthquake Tsunami

Hurricane

Terrorist attack

Plane crash Etc.


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Glo(al Catastrophic Risks

Do the criticalglobal risk issuesrank highly inyourorganization

Ho! arecatastro"hic risks

unique toindi#idualorganizations

$ource% &orld Economic 'orum( Global )isks *+,,
http://rimscanadaconference.ca/http://rimscanadaconference.ca/


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Case Study

2010 Deepwater Horizon spillExample

&ould you consider this a catastro"hic e#ent

&ho !as this catastro"hic -or


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Re#ining the "e#inition

How do you define catastrophic risk

for your organization!uestion

De-inition is unique -or di--erent entities

ust align !ith tolerable ca"acity

)e"resents a !orst case scenario


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)% Accepting the Potential


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*gnoring the +lephant in the Room

/o! likelihoode#ents

Di--icult to "redict

Nebulous e#ents

Poorly de-ined

metrics

0om"le1( -ar

reaching im"acts

"ypical

#esponseChallenges

! *nactivity! Avoidance

! ,-orce #ield.

! O## the shel# / (este##orts planning

$utcome

! Poorly prepared#or ma0or incident

! 1ntested /improper plans

! Potential #or

compoundingimpact


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Accepting the Potential #or 2oss

! Accept that catastrophic riskscan happen

! 1nderstand and diligently 3uanti#ythe (road potential impact onyour organi4ation

! Plan appropriately


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5% Measuring Catastrophic Risk


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"etermine 6olera(le Capacity

Target 2utcome

3e.g. Earnings4

! 'o much cane a##ord to

lose?! At hat point

do e riskcontinuity o#operations?

56

Capital wiped out

Covenant breach

Profit warning


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easuring 0atastro"hic )isk

7alues

8m"act Path!ay

$cenario

0ritical Processes

9uanti-y the "otential im"act to the organization

De#elo" a ste"6!ise a""roach to -ollo! theinter6related im"acts

De#elo" credible e#ent scenarios

0onsider :the im"ossible;

De-ine critical "rocesses !ithin

the organization

7alues

8m"act Path!ay

$cenario

0ritical Processes

7alues

8m"act Path!ay8m"act Path!ay

$cenario$cenario

0ritical Processes0ritical Processes

9uanti-y the "otential im"act to the organization

De#elo" a ste"6!ise a""roach to -ollo! theinter6related im"acts

De#elo" credible e#ent scenarios

0onsider :the im"ossible;

De-ine critical "rocesses !ithin

the organization
http://rimscanadaconference.ca/http://rimscanadaconference.ca/http://rimscanadaconference.ca/


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"e#ining Critical Processes

! &hat are the critical processes inyour organi4ation?

! &hat assets / processes / #unctions canyou not a##ord to lose?

! &here do multiple processes overlapor converge?

7alues

8m"actPath!ay

$cenario

0riticalProcesses

7alues

8m"actPath!ay8m"actPath!ay

$cenario$cenario

0riticalProcesses0riticalProcesses


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"e#ining Critical Processes

7alues

8m"actPath!ay

$cenario

0riticalProcesses

7alues


$cenario$cenario


0redit 000nloading at

0ustomer $ite

Dri#er $election

0riteriaDri#er Training Dri#er anual

0ustomer

?+@

Provides direction

Information sharing

Advising

Provides direction

Daily loads & deliveries

via on-board computer

Advises Repairs, etc.

Vehicle aintenance !ecure instructions from

dispatch

Drive to loading rac" to

load fuel per driver#s

manual

$op or bottom loaded

per driver#s manual

%alculate amount of

product Revie previous vehicle

inspection log

%hec" vehicle &

complete ne inspection

log 'pre-trip(

Repair any safetydefects

Vehicle operation

Road conditions

Delivery delays

echanical problems Accidents

)ire

Improper operation

'speeding, etc.(

*ses manifest to plan

daily delivery route

*nload at client location per driver#s

manual

%omplete daily shift report

Verify delivery tic"ets

2rdering( ser#ice( etc.

,+@

Delivery %rocess


0ustomer $ite

Dri#er $election


0ustomer

?+@

Provides direction

Information sharing

Advising

Provides direction





dispatch



manual


per driver#s manual

%alculate amount of


inspection log

%hec" vehicle &


log 'pre-trip(


Vehicle operation

Road conditions

Delivery delays


)ire

Improper operation

'speeding, etc.(




manual




,+@

Delivery %rocess

Critical

Process

Critical

Process

Critical

Process


0ustomer $ite

Dri#er $election


0ustomer

?+@

Provides direction

Information sharing

Advising

Provides direction





dispatch



manual


per driver#s manual

%alculate amount of


inspection log

%hec" vehicle &


log 'pre-trip(


Vehicle operation

Road conditions

Delivery delays


)ire

Improper operation

'speeding, etc.(




manual




,+@

Delivery %rocess


0ustomer $ite

Dri#er $election


0ustomer

?+@

Provides direction

Information sharing

Advising

Provides direction





dispatch



manual


per driver#s manual

%alculate amount of


inspection log

%hec" vehicle &


log 'pre-trip(


Vehicle operation

Road conditions

Delivery delays


)ire

Improper operation

'speeding, etc.(




manual




,+@

Delivery %rocess

Critical

Process

Critical

Process

Critical

Process


0ustomer $ite

Dri#er $election


0ustomer

?+@

Provides direction

Information sharing

Advising

Provides direction





dispatch



manual


per driver#s manual

%alculate amount of


inspection log

%hec" vehicle &


log 'pre-trip(


Vehicle operation

Road conditions

Delivery delays


)ire

Improper operation

'speeding, etc.(




manual




,+@

Delivery %rocess


0ustomer $ite

Dri#er $election


0ustomer

?+@

Provides direction

Information sharing

Advising

Provides direction





dispatch



manual


per driver#s manual

%alculate amount of


inspection log

%hec" vehicle &


log 'pre-trip(


Vehicle operation

Road conditions

Delivery delays


)ire

Improper operation

'speeding, etc.(




manual




,+@

Delivery %rocess

Critical

Process

Critical

Process

Critical

Process


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"eveloping Scenarios

7alues

8m"actPath!ay

$cenario

0riticalProcesses

7alues


$cenario$cenario


Global

e#ents

0reati#ity

Credi&lecatastrophic

event

scenario

8ndustrye1"erience

8ndi#idual

e1"erience

'ocus on critical

"rocesses

0onsider !orst

case e#ents

Plausibility

Assume -ailure

o- controls Take :outside6in;

"ers"ecti#e


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"eveloping Scenarios

! 1se critical processes as a starting point

! -ocus on a managea(le num(ero# ma0or scenarios

! Consider all donstream e##ects

7alues

8m"actPath!ay

$cenario

0riticalProcesses

7alues


$cenario$cenario



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*mpact Pathays

7alues

8m"actPath!ay

$cenario

0riticalProcesses

7alues


$cenario$cenario


'mpact %athways(

A method o- systematically identi-ying

e#ent im"act

Describe detailed "rogression o- the risk e#ent

reak im"acts do!n across the #alue chain

0onsider de"endencies and inter6related

"rocesses


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*mpact Pathays

7alues

8m"actPath!ay

$cenario

0riticalProcesses

7alues


$cenario$cenario


)hy *se 'mpact %athways

/ogical( ste"!ise a""roach to risk e#aluation

Promotes reasonable estimates o- likelihoodand im"act

Allo!s -or the identi-ication and inclusion o-

interde"endencies o- "rocesses

8ncreases the credibility o- analysis results


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*mpact Pathays

7alues

8m"actPath!ay

$cenario

0riticalProcesses

7alues


$cenario$cenario


)isk e#ent

Direct -inancial

/egal

)e"utation

2"erations

Etc.

$ccurrence 'mpact +reas 'mpact "ypes

0osts -or e1ternal

legal counsel

Budgement +RA +conomic Consulting%

6he materials: data and/or methodologies used in this presentation are proprietary to Marsh% 6his document or anyportion o# the in#ormation it contains may not (e copied or reproduced in any #orm ithout the permission o# MarshCanada 2imited: e;cept that clients o# any o# the companies o# Marsh < Mc2ennan Companies need not o(tain such

permission hen using this report #or their internal purposes: so long as this page is included ith all such copies orreproductions%

Copyright )@$$ Marsh Canada 2imited and its licensors% All rights reserved%

&&&.marsh.ca + &&&.marsh.com


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Catastrophic Risks