Category Archives: Risk Management

County fair teaches risk management with interactive game

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County fair teaches risk management with interactive game

Young Black Hawk County Fair-goers are receiving an early lesson in realizing what it takes to produce and bring animals to market at this year’s Commodity Carnival booth.

Chicago Mercantile Exchange Group and the National 4-H Council have partnered for the second year in order to educate young people about agricultural science and economics.

“U.S. farmers and ranchers are getting older and there are fewer people standing in line to take their place,” a 2012 article in Iowa Farmer Today, a Lee Enterprises sister publication of The Courier, reported.

Advancements in technology have spurred more diverse career paths in agriculture for future generations, but the average age of farmers has climbed up to the late 50s, according to the most recent U.S. Census of Agriculture.

The Commodity Carnival is aiming to reach out to younger generations. Last year, the interactive game educated more than 54,000 youths at 120 state and county fairs in 11 states last year.

Chris Grams, director of corporate communications at CME group, said the carnival is all about experiencing what it’s like to run a farm and the work that goes into raising animals.

“We really want (the kids) to gain an understanding that farming is a business and that farmers and ranchers do face risk in bringing food to the market,” Grams said.

The game is composed of three main steps: grow your livestock, sell your livestock and win a ribbon.

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The Higher Stocks Go, The More Important Risk Management Becomes

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The Higher Stocks Go, The More Important Risk Management Becomes

Summary

  • With “new high” showing up in market reports on a frequent basis, it is prudent to nail down equity risk management plans.
  • Economic and central bank signals are quite a bit different in the United States and Europe, making seat of the pants allocation decisions more difficult.
  • Rising inflation in the United States could bring correction/bear market plans into play in the coming months.

Financial Markets Are Complex Organisms

Just as the human brain is an extremely complex organ, the financial markets have an almost infinite number of factors that ultimately determine the value of our investment portfolios. Therefore, it is unlikely that “figuring it out as we go along” will produce favorable investment outcomes. In the present day, there are numerous and somewhat conflicting signals. On the bullish end of the spectrum, growth in the United States appears to be picking up and the Fed has been extremely accommodative. However, the economic bears can point to low inflation in Europe (fear of deflation) and rising prices in the United States that may force the Fed’s hand.

Investors Need A Consistent Approach

While we are not brain surgeons, our guess is that surgery involves somewhat of a “flow chart” or “if, then” approach. For example, if bleeding needs to be contained, then there are specific steps to address the unfavorable situation. An investment risk management plan works in a similar manner by having specific and executable strategies that follow an “if the market does this, then we will do this” script. A recent bullish example surfaced on June 8 as observable evidence began to surface in equities favor. The evidence allowed for a prudent “bump up” to the growth side (SPY) of our portfolios.

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Architecting a Machine Learning System for Risk

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Architecting a Machine Learning System for Risk

Online risk mitigation

At Airbnb, we want to build the world’s most trusted community. Guests trust Airbnb to connect them with world-class hosts for unique and memorable travel experiences. Airbnb hosts trust that guests will treat their home with the same care and respect that they would their own. The Airbnb review system helps users find community members who earn this trust through positive interactions with others, and the ecosystem as a whole prospers.

We can mitigate the potential for bad actors to carry out different types of attacks in different ways.

1) Product changes

Many risks can be mitigated through user-facing changes to the product that require additional verification from the user.

2) Anomaly detection

Scripted attacks are often associated with a noticeable increase in some measurable metric over a short period of time.

3) Simple heuristics or a machine learning model based on a number of different variables

Fraudulent actors often exhibit repetitive patterns.

 

Machine Learning Architecture

Different risk vectors can require different architectures. For example, some risk vectors are not time critical, but require computationally intensive techniques to detect. An offline architecture is best suited for this kind of detection. For the purposes of this post, we are focusing on risks requiring realtime or near-realtime action. From a broad perspective, a machine-learning pipeline for these kinds of risk must balance two important goals:

1) The framework must be fast and robust.

That is, we should experience essentially zero downtime and the model scoring framework should provide instant feedback.

2) The framework must be agile.

Since fraud vectors constantly morph, new models and features must be tested and pushed into production quickly.

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Sharpening strategic risk management

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Sharpening strategic risk management

While conventional enterprise risk management (ERM) techniques have done a reasonable job in identifying and mitigating financial and operational risks, research shows that it is the management of strategic risk factors that will have the greatest impact on your ability to realise your strategic objectives. Bringing ERM into the forefront of strategic decision making and execution could thus give your business a decisive edge.

Strategic risks can be defined as the uncertainties and untapped opportunities embedded in your strategic intent and how well they are executed. As such, they are key matters for the board and impinge on the whole business, rather than just an isolated unit.

Strategic risk management is your organisation’s response to these uncertainties and opportunities. It involves a clear understanding of corporate strategy, the risks in adopting it and the risks in executing it. These risks may be triggered from inside or outside your organisation. Once they are understood, you can develop effective, integrated, strategic risk mitigation.

Far from holding back the business, strategic risk management is about augmenting strategic management and getting the full value from your strategy. In a typical instance, a conventional approach to setting and executing strategy might look at sales growth and service delivery. Rarely does it monitor the risks of a shortfall in demand.

Key questions for the board

  1. How well is my strategy actually defined?
  2. How broad are the risks that we are considering?
  3. What risk scenarios have we considered to test our plans?
  4. Have we mapped our risks to key performance and value measures?

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The Startup Entrepreneur’s Guide To Risk Management

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The Startup Entrepreneur’s Guide To Risk Management

Only 44% of small businesses stick around four years or more. One big reason so many go away: Poor risk management.

Fortunately, help is on the way from the guys at VC Experts (subscribe to their email here).

They’ve published a helpful how-to on the art of risk management from Akira Hirai, the founder and managing director of Cayenne Consulting. With permission, we’ve excerpted the best bits below.

The Risk Management Framework

“Risk Management” is the art and science of thinking about what could go wrong, and what should be done to mitigate those risks in a cost-effective manner.

In order to identify risks and figure out how best to mitigate them, we first need a framework for classifying risks.

Once we know the severity and likelihood of a given risk, we can answer the question: Does the benefit of mitigating a risk outweigh the cost of doing so?

  1. Quadrant A: Ignorable Risks
  2. Quadrant B: Nuisance Risks
  3. Quadrant C: Insurable Risks
  4. Quadrant D: The Company Killers

Identifying & Mitigating the Company Killers

Companies flatline when the cash runs out and total current liabilities (i.e., bills due now) exceed total liquid assets. Risk management is all about identifying and mitigating the uncertainties — especially the company killers — that surround cash flows.

Uncertainty plagues businesses in countless ways, but we can group most company killers into the following categories:

  1. Market Risks
  2. Competitive Risks
  3. Technology & Operational Risks
  4. Financial Risks
  5. People Risks
  6. Legal & Regulatory Risks
  7. Systemic Risks

The knowledge of risk management is also essential establishing a startup business. If you have any opinion, leave it in the comment box below or send us a message.

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8 Risk Management Tactics Your Startup Should Have in Place

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8 Risk Management Tactics Your Startup Should Have in Place

What is one risk management tactic you implemented during the early stages of your business to protect you and the company?

The following answers are provided by the Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

  1. Voice the Red Flags
  2. Hire a Tax Advisor
  3. Mind the Cash Flow
  4. Have Good Contracts
  5. Create an LLC
  6. Get Lean
  7. Insist on Down Payments

These strategies could be simple yet important. Do you have any thoughts? Post it in the comment box below or send us a message.

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World Bank and Japan partner to improve disaster risk management in developing countries

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World Bank and Japan partner to improve disaster risk management in developing countries

With loss and damages from disasters increasing globally, Japan and the World Bank launched a new program today that will help improve disaster risk management in developing countries. Activities under this program will have a strong focus on strengthening resilience, including risk identification, risk reduction, preparedness and financial protection – connecting Japan’s knowledge with global expertise to support development planning and investment.

“Japan has long been a leader in mainstreaming disaster risk management into the global development agenda, and their own experience shows us that prevention pays,” said Zoubida Allaoua, World Bank Acting Vice President for Sustainable Development. “The new program will have a global outreach, bringing expertise from Japan and beyond to developing countries, to help improve the lives of the people, particularly the poor, who are most vulnerable to disasters.”

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Risk Management: A Look Back at 2013 and Ahead to 2014

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Risk Management: A Look Back at 2013 and Ahead to 2014

According to Yo Delmar, vice president of MetricStream, 2013 has been witness to extraordinary change. We are living and doing business in an increasingly global, mobile, social and Big Data world, fraught with new risks and complex regulations. As such, individuals and organizations are struggling to keep pace.

In response to greater uncertainty, complexity and volatility throughout 2013, we’ve seen increased convergence and alignment amongst internal teams, including IT, security and the business. As a result, organizations are better poised to provide the context for communicating risks. We’ve also seen the business ecosystem evolve to include geographically diverse vendors and third parties, and as a result, organizations must continue to view these entities as part of the organization itself, and manage them in a more tightly and integrated way.

Growing convergence among IT, security and the business: The landscape of risk and compliance continues to evolve, as organizations are asked to manage their IT risk and compliance activities far beyond that of basic audit and compliance requirements of the past. As new technologies bring their own set of unique risks, there is a growing disconnect among internal audit, security, compliance and the business on what it means to build, manage and lead a truly safe, secure and successful business.

As a result, we are seeing more focused efforts when it comes to getting these groups on the same page by building a common risk language, as well as a discussion framework to enable cross-functional collaboration. Doing so can set the context for communicating risks in a way that drives more effective governance and decision-making across the board of directors, executive management team and each respective business function.

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Risk Management

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Risk Management

For any business, supply and demand chain disruption represent at least, an immediate financial risk, that no business can afford to let it to happen. At worst, any disruption will have long term ramification on the future revenue. The fact of the matter is that disruption doesn’t happen out of a sudden. It is preceded by its precursor signals. These signals either are not detected or are ignored. So a proper proactive risk management program should be designed such that it encompasses and incorporates all active networks of a supply and demand chain. This way, any variance is detected at early stage on the upstream or downstream networks.

In our approach we investigate financial risk, environmental risk, and risk to customers. In a quantitative approach, the bottom line is profit against loss. In methodology we practice, the focus is on identification, evaluation, analysis and optimal management. We believe that any business action or decision generates risk. Consequently we have to learn to live with it. The way that civilizations have rid out the natural disasters exemplifies our recommended approach; risk tolerance. An organization can best survive any interruption or even disaster if risk tolerance is embedded in its infrastructure. This is the basic philosophy of supply chain Institute in dealing with risk.

In near future, we will introduce curriculum of risk management in the form of workshop tailored for industrial applications.

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