This guide covers the evolution and application of the concept of inherent risk, originally rooted in insurance practices. In the past, underwriters used Maximum Possible Loss (MPL) to assess potential catastrophic losses, focusing on worst-case scenarios. However, this approach was highly theoretical and often unrealistic. Over time, insurers transitioned to Estimated Maximum Loss (EML), which… Continue reading Guide to inherent and residual risk
Tag: risk mitigation
AI applications for risk management
The traditional methods of risk management, while valuable, can be hindered by human biases, limited data analysis capabilities, and the sheer complexity of modern business operations. Artificial intelligence (AI) offers a transformative solution, empowering risk managers with the tools and insights needed to navigate uncertainties and make informed decisions. This comprehensive guide delves into the… Continue reading AI applications for risk management
Reframing everything you know about risk management in a 1.5 hours – watch the full video from RISK-IN conference in Zurich
Risk management is often framed as a separate discipline focused on managing risks through risk registers, heat maps, risk frameworks and qualitative risk reports. This is like confusing astronomy and astrology. Risk registers, heat maps, risk frameworks and qualitative risk reports have nothing to do with risk management, let alone risk based decision making. This… Continue reading Reframing everything you know about risk management in a 1.5 hours – watch the full video from RISK-IN conference in Zurich
Never compare inherent to residual risk again
The concept of inherent risk originated in insurance where underwriters used Maximum Possible Loss (MPL) to determine the total value that could be lost in a catastrophic event. MPL considers the absolute worst-case scenario, with no controls in place, even if it’s highly unlikely to occur. The concept of considering the worst-case scenario loss has… Continue reading Never compare inherent to residual risk again
Quant models overthrow traditional risk management: embrace or perish?
In my last job as a Head of operational risk and insurance, I needed a team of 3 quants to build risk models to support decisions, quantify expected losses and calculate expected shortfalls. In my current job, as Head of risk, insurance and internal audit, I can do all this with with 2 AI models,… Continue reading Quant models overthrow traditional risk management: embrace or perish?
The better alternative to “inherent” and “residual” risk concepts
Few things are certain in life: death, taxes and someone in the risk community asking about inherent and residual risks. In fact the question is so frequent that I even did a short video response: To most organisations inherent vs residual comparison is a way to measure potential risk mitigation effectiveness and the reduction in… Continue reading The better alternative to “inherent” and “residual” risk concepts
Forget about risk management. Measure the likelihood of success instead. #ChangingRisk
My friend, Norman Marks, has been talking about rebranding risk management for years. Norman calls for risk professionals to focus on enabling success rather than avoiding failure. I think this is brillian advice. A way to communicate risk management insights to executives and the Board is to talk about the likelihood of success. Well, the… Continue reading Forget about risk management. Measure the likelihood of success instead. #ChangingRisk
Finally! An alternative to risk matrices
Ok, the title is obviously a joke, because the alternatives (multiple) have been available to anyone willing to learn for over 50 years. But since you clicked, this article will probably change your life for the better. Thank you Damir Ramazanov, Group Project Risk Manager, ERG for helping with the article and providing quality review. … Continue reading Finally! An alternative to risk matrices
Gamification in Risk management 2.0
I have recently came across a wonderful article on gamification https://www.tenfold.com/gamification/gamification-tenfold-digital-engagement-sales-motivation and has decided to build another risk management game for the next years G31000 risk management conference. We will first pilot it at the largest risk management conference in Russia and then bring it to the global G31000 event. Any ideas on the topic for… Continue reading Gamification in Risk management 2.0
Risk management used to be a science, then it became an art, now it’s just bullsh@t
Latest views from Alex Sidorenko on how “innovation”, lack of business acumen and consultants are killing modern risk management in non-financial organizations. First there was science… Some sources suggest probability theory started in gambling and maritime insurance. In both cases the science was primarily used to help people and companies make better decision and hence… Continue reading Risk management used to be a science, then it became an art, now it’s just bullsh@t
