Managing Risk’s Butterfly Effect

- Chaos Theory

It is said that something as small as the flutter of a butterfly’s wing could cause a typhoon halfway around the world.

…chaos brings opportunity

For those who are prepared…

How do you decide which risks are worth embracing?

Quantitative & Qualitative

Quantitative Risk Assessment Protocol

a) Conduct a risk assessment and vulnerability study to determine the risk factors. (b) Based on the top 5 risk factors - determine the value of assets under risk. (c) Determine the historical attitude of the company @ risk exposure.(d) Estimate the Annualized Rate of Occurrence (ARO) for each risk factor. (e) Determine the countermeasures required to overcome each risk factor. (f) Determine the Annualized Loss Expectancy (ALE) for each risk factor. (g) Conduct the safeguard cost/benefit analysis by calculating the difference between the ALE prior to implementing the countermeasure to the ALE after implementing the countermeasures . (h) Based on the above analysis, determine the return on investment using Internal Rate of Return (IRR).

Litigation Risk Assessments

• Case Status – A short description of the current status of the proceedings, anticipated motions and discovery, and settlement discussions or their absence. This section also can address issues such as the existence of an arbitration agreement and insurance coverage.

• � Legal Analysis – An assessment of any significant legal issues, including the benefits and risks of obtaining a binding judicial precedent.

• � Strengths and Weaknesses – A succinct outline of the strengths and weaknesses of your factual and legal position, including such factors as the substance and impact of the evidence, the availability and quality of witnesses, the sympathy or not of the adversary, the friendliness or hostility of the tribunal, and the competence and experience of opposing counsel.

• Budget � – The anticipated legal budget. • � Possible Results and Probabilities – An assessment of damages, including possible

results, probabilities and discounted values, and anticipated litigation expenses. The case value assessment includes percentage estimates based on various potential outcomes. Although percentages may imply more precision than is justified, they convey information more clearly than imprecise adjectives frequently used in describing litigation risk.

Hazard Identification

Dose-Response Analysis

Exposer Assessment

Risk Characterization

Risk from a business perspective…

…an element of effectivestrategy and gooddecision making

Chaos TheoryGame TheoryMilitary Risk Analysis: OODAScenario Planning

Assessing the Strategic RiskSimplicity Complexity

Certainty Uncertainty

Knowing Forecasting

Proactive Adaptive

Strategic Planning

Scenario Planning

Take a Chance

Take A Pass

DelegateTake Your Time

HIGH

LOW

LOW HIGH

Probability

Impact

Trigger Points

The Key To Success in the New Normal…

•Nimbleosity•Nimbo-licious

PQ&A Top 101. What is the REAL time frame?2. What are the REAL numbers?3. Can we verify the data?4. What is the Ripple Effect?5. Who REALLY needs to be involved?6. Who can/will make this decision?7. Are we looking for unanimous or consensus?8. Can this decision be overturned?9. Do we have the resources and authority to implement

the decision?10. What is our plan for reviewing the outcome?

When values are clear,

decisions are easy.