Minimizing Risks While Maximizing Opportunities

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Embedding Sound Risk Management Practices into an Organization

Core principles for risk management adoption within an organization.

The trouble with risk assessment is that it's hard to decipher the relationship between different events. For example, an earthquake in Japan has some pretty obvious implications for all kinds of companies with other operations in the country. But disruptions in the supply chain involving those companies can have any number of possible outcomes, which makes it hard to mitigate a risk that no one ever saw coming.

To try and tackle that specific risk management issue, IBM late last week bought a company called Algorithmics, which makes risk analysis software that is fairly well known in the financial services arena.

According to Laurence Trigwell, worldwide leader for IBM's Financial Services Business Analytics business, what makes Algorithmics unique is the software it provides makes it a lot easier to correlate all the information available to get a deeper understanding of all the risks facing a company in the wake of an actual or theoretical event.

In the wake of the recent economic downturn, it's pretty clear that a lot companies did not have a good handle on how much exposure they had to any number of economic events. That means that it's pretty clear that the concepts being applied by Algorithmics can be broadly applied outside of just the financial services sector.

Having access to software that identifies those risks may not make all that much of a difference in the end. But in a lot of cases Trigwell says a prescriptive approach to risk management can not only limit the downside of a particular event; it might even help maximize a particular opportunity.

Given those probabilities, it's hard to argue with at least making some level of investment in analytics because one way or another it's almost certain to pay off.