integrating risk mng pve 2013

8/10/2019 Integrating Risk Mng PVE 2013

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Target

Positive

deviation

Negativedeviation

Future: probabilities

Threats

Opportunities

Risk has a positive side

Negative deviation from target

Today’sValue(mark-to-market)

As management projects into the future, the valueof the firm will be affected by many different market

and business variables – i.e. risk factors.

Tomorrow’sPossible

Values(mark-to-future)

Scenarios / Probabilities

Upside

Downside

Risk = effect of uncertainty onobjectives



Target

Positive

deviation

Risk Appetite

Negativedeviation

Future: probabilities

Threats

Opportunities

Risk has a positive side

But usually perceived as negative

Today’sValue(mark-to-market)

As management projects into the future, the valueof the firm will be affected by many different market

and business variables – i.e. risk factors.

Tomorrow’sPossible

Values(mark-to-future)

Scenarios / Probabilities

Upside

Downside

Mortgage Crisis => Global Financ Crisis

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4

+

-

+ RiskOpportunity

- RiskRegret (3)

!Volatility (2) = proxy for uncertainty

Value at Risk (1)

Probability

High Moral &Social Norms /Higher than

Average Value

Inferior Moral &Social Norms /Lower than

Average Value

Within boundaries & above average

EnrichShareholders

& ServeStakeholders

Innovative Strategies

“Risk” Management

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5

+

-

+ RiskOpportunity

- RiskRegret (3)

!Volatility (2) = proxy for uncertainty

Value at Risk (1)

Probability

Higher than Average Value

Lower than Average Value

Within boundaries & above average

EnrichShareholders

& ServeStakeholders

Innovative Strategies

“Risk” Management

Impact



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+

-

+ RiskUpside Opportunity

- Risk

Downside Regret

Best Corp Governance Practices

Benchmark

Attitude of Integrity:

Spirit of the law

Compliance

Letter of the Law

Moral & Social Responsibility

Legal & Economic Accountability

Narratives

Probability

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Creation of

Shareholder Value

&Serving Stakeholders

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+

-

+ RiskUpside Opportunity

- RiskDownside Regret

Creation of

Shareholder Value&

Serving Stakeholders

Boards enablingBased on clear & communicated(1)Vision & Values statement that

underpin a creative SustainableValue Proposition

(2)Systemic thinking• Setting Direction• Creating Alignment

•

Maintaining Commitment

Build Accountability& Trust

Legal Accountability

PerniciousPathology of

CEOs

Boards prevention(1)Explicit Risk Manifesto

• To define basic principles in line with risk

appetite

(2)Talent driven Risk Scenarios•

Risk oversight , professional development thatpresent high impact financial Black Swans(currency collapse; run on fin instruments; geopolitical

& demographics changes; disruptive technologies;

constricting regulations)

(3)Wisdom of crowds• Tapping the wisdom of investors• Better shareholder outreachRegret Analysis – Risk Apprentite

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Illegality

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Enrich

Shareholders

& ServeStakeholders

Regret

Opportunity

!

Grace

Disgrace

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integrating risk mng pve 2013

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