Managing Risks In Business Ba01.ppt

Living Dangerously : managing Risks in business

What is a Risk ?

The conventional definition of Risk termed it as an uncertainty

If it was good it was called an opportunity

If it was bad it was known to be a threat

Risk in a business therefore was an uncertainty that could affect the business objective

Uncertainty

Business objectives •Production Objective •Sales Objective • Cost Objective •Time Objective •Quality Objective •Survival Objective •Growth Objective •Dominance Objective •Employee Objective •Social Objective •Client Objective

Risk Management in business was done by collecting historical data and analyzing problems that had happened in the past

However with Business becoming intensely competitive in Price ( Incremental and entry level pricing) and Time ( Just in Time inventory management ) the Relevance of Risk Management increased exponentially.

Rather Risk today is a certainty

It must be analyzed, measured responded and mitigated regularly

What are the top business Risks in today’s environment ? •Protecting liquidity : Fa01 : Threat •Digitizing Business Process : Ta01 : Opportunity •Controlling operating costs : Fa31: Threat •Revamping the workforce : Ca01: Opportunity •Globalizing business operations : Ba51: Opportunity •Re-working business solution : Ba71 : Opportunity

Believe it or not, it’s more opportunities than threat.

Traditional Method

Time Cycle Module

åRisk is an Uncertainty

å Risk is a Certainty

åRisk is an extraneous factor

å Risk is a item of daily check list

åRisk is a “ if “ factor

å Risk is a “When “ factor

Methods for Risk analysis

Method for Risk Analysis

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Sensitivity analysis

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Monetary value analysis

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Decision Tree Analysis

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Variance Analysis

Why, The Time Cycle Module •Because Business Process and Business solutions today have a time bound shelf life •Because after the global credit crisis, businesses require frequent and time bound monitoring, and risk models require updated assumptions.. •Because surpluses have now vanished and optimum utilization of resources are achieved by use of the Time based work Modules. •Because technology is timing out age old business practices •Because digitization and rationalization is needed for survival and growth. Such rationalization is to be carried out from time to time. •Because at the systemic level Risk could be very dynamic & damaging requiring focused and updated rationalized data for risk modeling. •Because annual, quarterly or monthly planning, and reporting is becoming irrelevant as situations are changing by the week.

What is the Time Cycle Module å The most important resource in the world today is Time å Fortunately it is one uniform standard all over the world without any dispute. å Minutes, Hours, Days, Weeks and Months are standard for the Chinese, the American, the French or the Iraqi. å The Time Cycle Module TCM is a unit of 1 week of Time for which any activity or work is planned monitored and controlled for deliverance. å Each weekly module is harmonized with the other to grow into monthly, quarterly or yearly targets & schedules for operations as well as reporting. The week is a unit module of time in TCM

Risk Analysis in the TIME CYCLE MODULE TCM •

Risk Analysis in the TCM is done by variance analysis

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Risk in the TCM is no uncertainty. It is a measured deviation

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Risk is measured by calculating deviation of measured parameters against baseline figures

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Risk in the TCM is defined as the deviation of “the objective achieved” from the “objective desired” as per the Terms Of Reference.

• Risk when pre-assessed is called Risk Management. • Risk management can be done through Risk identification. • For identification of Risk the “Terms of Reference” and historical trends must be preset. • For Risk identification a route map must be set against the “Terms Of Reference.” • Deviation of actual performance over the route map is the risk.

Risk, Risk Cause and Risk Effect Traditional Method

Time Cycle Module

Risk is an uncertainty

Risk is a certainty

Risk cause is unknown

Risk cause is the uncertainty that must be checklist monitored

Risk cannot be measured at times due to data insufficiency of the unknown variables.

Risk is a weekly deviation from the Terms of Reference or at times from the historical trend that is measured and controlled.

Risk effect is a balloon effect and often could go out of control.

If the deviation is sharp and uncontrolled it will snowball to a crisis. See following Graph. Whenever such deviations occur it

Excerpts from the May 2008 report of Congressman Jim Saxton to the U.S. Congress on the Housing Bubble months before it became a Global Crisis.

The sharp rise in subprime mortgage loans and sharp fall in FHA insured mortgages during the years 2003 to 2007 show that there was no sudden rise in housing demand but a demand manipulation to cash in on the easy credit policy. Sharp deviation from normal historical trends indicate presence of high Risk as per TCM. Category : Risk associated with credit . Class: Expected Detailed Analysis : “ Finance Risk Case Study” Fa051 Series

• Time Cycle Module : Source references The TCM Risk management module Ba01 is based on the Book “ Project Management Time Cycle : Time Cycle Module : Volume I From Concept to Feasibility.” ISBN 1440493332. Published in Dec 2008 the Book suggests several new concepts to improve resource utilization in both the Business Process and Business solution. Since the concepts are new and challenging, they are here being explained step by step in slides, to make them more user friendly. We hope “TCM Step by Step” will make the Book a more client friendly offering for our valued readers. We do not consider them dummies and look forward to interact with these offerings in days to come.

Business Time cycle module Series •Business Risk Series : Ba01…. •Business Risk Case Studies Series : Ba31.... •Business data pruning and co-relation Series : Ba41… •Globalizing business operations Series : Ba51….. •Re-working business solution Series : Ba71 ….

•Business Risk Case Study : Ba31 •“Risk Measurement for the Product launch of an aerated soft drink” Scheduled release 6th July 2009 Series on Financial risks : Series on Technology risks: Series on Career risks:

Fa01…Series Ta01…Series Ca01…Series

The Project Management Time Cycle – Vol. I TIME CYCLE MODULE: From concept to feasibility ISBN 1440493332 available at Amazon Economy to Ecology Our goal is to help promote clean, safe and better practices in economy and ecology worldwide. Balanced, efficient and a little more sustainable. Kindle Blog Ecothrust ASIN: B0029ZAUAY For any queries mail to [email protected] Our heartfelt thanks to Google images, Wikipedia, and several other image groups without which this presentation would not be possible.