Monday, 13 April 2015

Basic Risk Types

Today we look at the Basic Risk Types that exist within an organization.

If you are asked to classify the number of possible sources and combinations of risk that there are it would be impossible as risk revolves around the very nature of the effect.

However, a basic classification of risk is differentiated in terms of the risk level on which it impacts within the organization. A second classification is the very nature of the risk, its origin and characteristics, and if the risk is dependent upon or linked with other risks. The classifications are listed below.

·     Strategic risk
·        Change or project risk
·        Operational risk
·        Unforeseeable risk
·        Financial and knowledge risk
·       Internal and external risks
·        Speculative and static risks
·        Risk interdependency

Keep in mind that these classifications overlap. In this video AIG and Fortune Knowledge Group invited a panel of subject-matter experts to discuss the complex risks facing corporations and the communities in which they operate. From these discussions, a series of videos was produced to help corporate risk managers visualize their own potential losses, improve their level of preparedness for major loss events, and ultimately, preserve their business continuity.

Strategic Risk

An organization develops its strategy at the corporate level. It makes an assessment of the current market conditions and will then forecast the organizational changes required that will occur in the market over a period of time. 
This is a great video example by INTEL to bring the point home:

This video demonstrates INTEL’s current assessment of its market. Its proposed strategy will include the development and introduction of faster computing and interconnectivity in the form of a suite of wireless services such as device charging, data transfer, and enriched cloud based services to name but a few. So what is the strategic risk element? Well, it is reasonable to say that their strategic decision to develop these products and services could be wrong (which I personally doubt).

This video demonstrates INTEL’s current assessment of its market. Its proposed strategy will include the development and introduction of faster computing and interconnectivity in the form of a suite of wireless services such as device charging, data transfer, and enriched cloud based services to name but a few. So what is the strategic risk element? Well, it is reasonable to say that their strategic decision to develop these products and services could be wrong (which I personally doubt).

The long-term performance of an organization is dependant on risk relating variables such as the market, corporate governance and its stakeholders.

The market can change at relatively short notice and is universally known to be highly variable, especially when companies operate in another country where economic characteristics can change.

 Corporate governance risk relates to the reputation of an organization and its ethics within which it operates. An organization’s desire to maintain that reputation can sometimes be at the expense of innovation or development of new products and services.

Shareholders, business partners, customers and suppliers attitude can change quickly if dividends fall, it is therefore incumbent on the organization to manage its stakeholder risk.

Other examples of strategic risks include but are not limited to:-
1.     The original strategic plan may have been correct but internal organizational changes may have
a.     Compromised the plan leading to a loss of efficiency.
b. The required changes in operational processes may not have been introduced
c.      The planned changes may not have delivered what was required.
2.     The strategic plan might have been incorrect
a.     Incorrect market assumptions were made
b.     The market environment may have been incorrectly assessed
c.      Adequate resources may not have been available
d.     The plan is not conducive to the organization
3.     The original strategic plan may have been correct but was compromised due to external changes
a.     A significant change in the external environment
b.     The emergence of new competitors
c.      The release of new competing products
d.     A change in statutory controls

Strategic risk is time dependent and more complex and difficult because it is applicable over a long term and has to be modeled and assessed respectively, as such, it is more difficult to manage than operational or change/project risk which are designed and implemented within a relatively short timescale.

Lets have a look at this video from CMOE partners which helps you understand the fundamental difference between operations and strategy:

Friday, 10 April 2015

Risk vs Reward - Notes #3

Today’s post represent my study notes for Strategic Risk Management where the objective is to give a basic overview of the subject as opposed to developing a detailed knowledge and understanding at this time. With this in mind the topic that will be covered is  "TheConcept of Risk"


If you are from France then you would be pleased to know that the word ‘risk’ originated from the French word ‘risqué’ and it was only around 1650 that the word entered the English language. It was predominantly used in the formal legal sense in insurance documents around the 1730’s. This video depicts the concept of modern day risk on the open seas:

As you can see, this high-risk activity offers potentially high rewards as these pirates are prepared to take these risks because of that fact; the chance of making a lot of money very quickly vs. the risk of being killed or captured. It is interesting to note the concept of risk and reward in the video as the pirates are well aware that their potential gains from their actions would not be possible without the risk element.

Today the world is full of risks and these risks increase as a function of both human and organizational evolution and development. In an earlier post I mentioned that risks exist both inside and out of an organization, it is therefore important to examine the level of these threats. The larger and more complex an organization then these risks also tend to increase. This video highlights a new form of risk emerging in the Information Technology sector.

Cross-border business between organizations rely on the latest technology to become efficient and as such they will buy the latest computers and software, however this becomes a potential IT risk as these organizations become dependent on electronic data storage and communications. At loss to the business is sales, customers, and the strength of its brand in the market place.

Just like the pirates in Somalia so too are the Hackers who understand the risk vs reward concept. In this final video we listen to Chris Drake at a TED seminar.

As a person you too face varying degrees of risk in your everyday life. This is dependent on your personal attitude towards various sporting activities where some generate a higher level of risk than others. Lets have a look.

We naturally consider risk and reward as part of any decision-making process. We make decisions constantly whether major or minor, and directly or subconsciously. As a buyer we also make extreme ‘scientific’ and intuitive’ risk and reward considerations. 

In making any decision we have a human cognitive process for considering risk and reward, this is our process for ‘risk analyses. We evaluate potential risks and rewards in terms of the range of acceptable outcomes when deciding on whether or not to do something. Our mind considers this model in which scenarios i.e. possible events and outcomes are considered in terms of possible actions. The possible gains are then balanced against the possible losses, and a subjective decision or objective decision is made as to whether or not that outcome is acceptable. This conditions of risk is the basis of decision making by us which we perform many times everyday on a subjective basis and often at a subliminal level.

Risk is not a negative concept as the universe is characterized by constant change and the world in general by uncertainty. Because change is a dynamic mechanism and influences almost everything, entities that evolve most efficiently are those that can adapt most effectively to change.

Risk is necessary in order for opportunity to exist. It must be understood that to develop an opportunity, you have to accept the risks that inevitably accompany that opportunity. It is therefore important that you can identify those risks and then manage them so that they do not threaten you or the existing business. This is the reason why risk management systems must monitor those risks so that they can be controlled at acceptable levels while exploring the corresponding opportunities.

Have you ever noticed that a good poker player, if he has a particular winning hand, will raise the stakes so as to exploit the opportunity and intimidate the competitors? Each competitor has their own risk appetite (which should not be confused with risk attitude) at which point there is a limit that they dare not go. This concept is extensively used in business when one organization can raise the stakes to a level where it can exploit the weakness of its competition. This is one of the ways where risk is a positive attribute. 

Risk is not a static entity, its dynamic. It is not only about potential negative events butit is also about positive events. Risk management entails looking at the complex worldof business, analyzing all of its opportunities that are presented and then making an informed decision as to which one is the best. 

Wednesday, 8 April 2015

Blogger Challenges

Hi folks. I'm looking for comments with this post today.

I'm having problems with goggle blogger in terms of organizing my posts. For instance, I'd like to have a tab on my blog at the top, similar to by Pat Flynn. If you can show me how I will greatly appreciate it.

Also, I've subscribed to Google Adsense to try and make some money in my blog because, well quite frankly, I'm reading so much about making money online that I want to do the same applying my MBA Strategic Risk Management study notes, but alas, I think the Internet has its own school for this field as I'm not getting any traction at all on my blog and I'm yet to see one Google Adsense on my site. You can check out this video here:

As well as, while looking at other super blogger websites such as Pat Flynn and others, I've noticed that they use Wordpress. Now I must admit that I chose Google blogger because I felt that if I used a Google product I would get preferential treatment. I'm still waiting, even though I must admit that I don't have that must content as yet, but I will keep trying. Your comments can help me see where I'm going wrong:)

Oh, and this one is a classic problem that I'm having. How do you get your text to be at least 1.5 in line spacing? I had to copy my previous post into Microsoft Word then apply their line spacing feature and then copy that new script and reinsert back into my old posts........what a drag:( if any of you folks out here can help me then please drop a comment.

Lastly, I'm typing this post using my iPad....yep my iPad! It's the worst! iPad has no word features like bullet points, underline, nada!! It's such a shame:(

Well my loyal fans, I'm really looking forward to any advice that you can give me on how to improve my blog using this Google platform. Tomorrow I will write a post with my study notes on Strategic Risk Management as I've haven't hit the books for a few days......I've been a bad boy!

Thanks and peace out!

Saturday, 4 April 2015

Five steps to building a Wordpress site

'Wordpress' is one, if not the most popular, platform for building your website or blog. But how do you actually go about starting the process? Well, based on the research I've done, here is what I want to share with you.

The five steps are:
1. Outline your site's content
2. Create pages
3. Configure your site to use a static home page
4. Pick a theme you love
5. Create a menu

Good, now let's break each step down further to better understand the process.

1. Outline your site's content
To begin with, sketch out the important pieces of your site i.e critical information and the pages.

You have heard and read that "Content is king!" That's right, spend some time thinking about what you want to write, and what you don't want to write about. Do this activity before you pick your Wordpress "theme".
Your content should drive the theme, don't just overestimate the importance of how a site looks and underestimate the importance of what it says.

One of the first activities that Wordpress asks you to do is to choose a "theme". A theme sets the look and feel of your site. Wordpress offers many themes but each can have significant differences regarding layouts, options, and functionality. Just remember, don't spend considerable time and effort customizing it, without planning for content.

An example of a content plan could be you want to write about 'backpacking'. Specifically, you want to write about the places you've been, the places you want to go to, backpacking tips, and backpacking gear. Got it? Great!

After you have the bones of your content you want to organize it using Wordpress "categories and tags" so that visitors can navigate through your content or discover your site through "Reader".
Try to keep in mind that a sitemap serves as a visual representation of how your content is organized and how each piece relates to the whole.