RMI 2302 Nyce Module 8 Latest Update Graded A+

RMI 2302 Nyce Module 8 Latest Update Graded A+ Business risk Deviations in profitability. This is a very broad category of risk that is caused by operational, hazard, financial, or strategic risks. Business risk can be caused by: • Prices • Regulation • Competition, etc Operation risk Potential losses from internal sources: • Manufacturing processes • Fraud • Mismanagement • Employee mistakes Hazard risk Typically used in insurance industry to describe potential losses that only have a down side (pure risks), • Example: Fires, auto accidents, tornados, earthquakes, etc. • Very traditional risk management term • More broad than simply personnel safety Financial risk Potential variation due to financial causes • Examples: losses due to exchange rate, investment losses, credit risks, liquidity risks, etc. Strategic risks Potential losses (variation) from poor business decisions: o Product mix o Supplier choice o Financing options • Many decisions fall under "strategy", if any of them are wrong/faulty there is strategic risk • Reputational risk can be associated with strategic risk, but can often be a separate classification o Example: Florida State is going through Reputational Risk right now with athletics and Title 9 investigations. Big data we create so much data today, how can organizations use it? 1. Data mining • Tracks buying trends • Utilizes targeted marketing 2. Mitigate risky business practices, employee fraud (operational risk), & black swans What are the different types of risk organizations need to think about, from operational risk to the so-called black swans? Operational risk - the people, processes, and systems in place to produce the company's product/service. This includes internal fraud, external fraud, products & business practices, damage to physical assets, business disruption, system failures, process management, employment practices, workplace safety. What is a black swan risk? An extreme outlier: high impact, hard-to-predict, rare events that generally people don't expect. For example: The Bernie Madoff Ponzie Scheme (took people's money to invest it, but lied and really pocketed it), mortgage crisis How has risk changed in recent years? Globalization, cascading network effect and Operational Risk (30% of business losses are caused by this) Where does data analytics fit in? Tools to predict areas of vulnerability in organizations to black swans and other kinds of risk. Look for markers of situations where human behavior can impact operational risk. Look for factors that influence human behavior. For example: laziness, fatigue, moral or ethical "opportunities", stressors (debt, job concerns, family issues). Could data analytics have helped BP? There were reports that on-site employees were worried about such an event, but no channel to communicate. BP didn't monitor systems closely, costly to do so, cut corners. Future of behavioral analytics? Systems are pretty good at looking for potential risks ignoring the human element. Behavioral analytics adds that examination of the human component, mixed with statistics and external analysis. More complete or "intelligent" risk analytics. Behavioral Analytics the study