Transcript of Dr. István Fekete: The Role of Integrated Risk Management in Organizations April11th, 2008....
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- Dr. Istvn Fekete: The Role of Integrated Risk Management in
Organizations April11th, 2008. Budapest
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- Dr. Istvn Fekete 3 Table of Content Most important terms of
risk management Presentation of the risk assessment methodology, if
not or not enough historical data is available Structure of
integrated risk management Conclusion
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- Dr. Istvn Fekete 4 Most important terms of risk management
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- Dr. Istvn Fekete 5 Most important terms Risk Each risk has two
features: Cause (any event, action and missing of action, which has
probability of happening). Effect on achieving of (e.g. strategic,
organizational) goals Risk management It is a systematic process,
in order to identify and evaluate the potential of risks, and
complete and carry out an risk handling plan Risk controlling It is
the continuous tracking of implementation of risk handling plan and
preventive assessment of new risks and to measure the efficiency of
risk management activity
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- Dr. Istvn Fekete 6 Risk management process
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- Dr. Istvn Fekete 7 Main types of risks Strategic Operational
Finance Project
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- Dr. Istvn Fekete 8 Applications level of risk management during
planning activity at a company
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- Dr. Istvn Fekete 9 Process based, integrated risk management
SalesStrategic planning Product- Develop. Market & costumer
analysis Business processes Public Relation Project management
Process optimisation Finance Protection of the Environment
Management processes HRManagement ITManagement Risk management Risk
management activity helps to integrate the business- and management
processes. e.g. Evaluation of alternatives of strategies based on
risks Identification and evaluation of project risks during
preparation and implementation phases Monitoring of the most
important projects
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- Dr. Istvn Fekete 10 Presentation of the risk assessment
methodology, if not or not enough historical data is available
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- Dr. Istvn Fekete 11 Steps of the methodology In several points
of the decision making process, a responsible team make the
following with the risks via the workshops: Identify (via
brainstorming, via consultation..etc.), Evaluate via Scenario
analysis, Sensitivity analysis, Monte-Carlo simulation, real
option-, and game theory models ) Select the critical risk factors
according to evaluation, Formulate action-plan in order to handling
critical risks in an efficient way Continuous control the
implementation of action plan and reassessment So it is facilitated
to fulfil the companys strategic goals. The quality and efficiency
of risk management activity depends on in which point of the
decision making process and in which context is used. Random number
generation Running of iteration Iter =Iter + 1 No Start Yes End Are
iterations ready?. Creation of a model
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- Dr. Istvn Fekete 12 Types of risk management actions Accept 4.
step Net risk Insurance Decrease Commission of primary
contractor
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- Dr. Istvn Fekete 13 Main areas of application Price
optimisation by using business risk analysis and game theory
Modelling the Fulfilment of the Real Estate Utilisation Plan by
Monte-Carlo simulation Identify and evaluate of risk factors, which
have impact on product portfolios revenue Risk of human resources
handling of fluctuation with risk management methods Development of
company valuation stochastic model used for strategic capital
investment Risk assessment to support internal audit planning
activity
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- Dr. Istvn Fekete 14 Key features of methodology Reliable
solution even in case when historical data is not available or
deficient Module type structure allows both joint and separate
application of particular modules Certain module outputs can be
used as input for other modules This features makes the practical
application of Monte- Carlo simulation, real -option and game
theory much more simply Risk factors are always identified and
assessed in the frame of workshops. By applying this method Etalon
models could be developed. These models can be used easily and
quickly later on.
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- Dr. Istvn Fekete 15 Structure of integrated risk management
system
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- Dr. Istvn Fekete 16 Interconnection of risk management
applications Risk based strategic and financial planning activity
Project risk management Process based operational risk management
Risk management for internal auditing Ad-hoc risk management
(supporting of decision making process) vertical connection
horizontal connection
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- Dr. Istvn Fekete 17 Practical outline of integrated risk
management software (Integrisk) Database server Risk modules Web
interfaceExcel export
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- Dr. Istvn Fekete 18 Modules of Integrisk software Strategic
planning module Evaluation of strategic alternatives based on
yields and risks Risk based evaluation of index numbers of
strategic goals Probability analysis of quantitative strategic
planning Financing (operative) planning module Scenario analysis of
quantitative financing planning Project planning module Activity
based time risk management Activity based cost risk management
Process based operational risk management module Process based risk
management Risk assessment of supporting of internal auditing
plan
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- Dr. Istvn Fekete 19 Modules of Integrisk software Each module
include: consolidation of critical risk factors and risk handling
actions, Comparative analysis planned vs. actual, report
generation, cost-benefit analysis.
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- Dr. Istvn Fekete 20 Key features of IntegRisk software
Module/model based structure Knowledge base Intensive
decision-making support Efficient risk handling activity Applied
risk management Reliable input data for other risk management
software
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- Dr. Istvn Fekete 21 Conclusion Risk management activity helps
to support decision making process e.g. -Evaluation of alternatives
of strategies based on yields and risks belonging to yields to meet
strategic objectives - Identification and evaluation of project
risks during preparation and implementation phases to ensure to
finish the project on time and within a budget - Elaboration of
risk based financial plan to reach free cash-flow as planned -
Assessment of process based operational risks to increase the
efficiency of internal control activity The purpose of risk
assessment is to select critical factors which should be handled in
any way! Also very important to track the risk handling action
continuously and measure the efficiency of risk management
activity!
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- Dr. Istvn Fekete 22 Thank for your kind attention! Any
questions, remarks?