...Introduction “The key is not to eliminate risk; it is to measure it and manage it wisely” (Steiger, Strong, & Wilson, 2009). In the world of finance, the most difficult objective to achieve for individuals, corporations, and small businesses is the balance between financial risk and reward. This paper will look at both historical tools and avenues modern technology has adopted to create a balance for financial investors in the market today and how these tools are implemented in today’s businesses. Identifying opportunities and recognizing the risk associated with them is crucial to financial growth and success. Entities are continuing to find ways of leveraging risk by using different modeling tools to understand the source of risk, measure risk and transfer risk (Schwartz, 1996). Due to the expansion and growth of companies into new markets, risk has become an increasing concern for many businesses. It is clear through the recent market crash that more robust risk management tools must evolve with the changing investment practices that are taking place in today’s society. “The world’s financial markets have exploded with new products and new techniques such as derivatives and securitizations giving rise to huge new markets” (Epetimehin, 2012). If implemented strategically and used correctly, risk management tools can aid businesses in their journey of financial success and help them develop finely tuned investment planning and business strategies (Anonymous, 1983)...
Words: 2301 - Pages: 10
...failure of risk management: a book review with 7 comments Introduction Any future-directed activity has a degree of uncertainty, and uncertainty implies risk. Bad stuff happens – anticipated events don’t unfold as planned and unanticipated events occur. The main function of risk management is to deal with this negative aspect of uncertainty. The events of the last few years suggest that risk management as practiced in many organisations isn’t working. A book by Douglas Hubbard entitled, The Failure of Risk Management – Why it’s Broken and How to Fix It, discusses why many commonly used risk management practices are flawed and what needs to be done to fix them. This post is a summary and review of the book. Interestingly, Hubbard began writing the book well before the financial crisis of 2008 began to unfold. So although he discusses matters pertaining to risk management in finance, the book has a much broader scope. For instance, it will be of interest to project and program/portfolio management professionals because many of the flawed risk management practices that Hubbard mentions are often used in project risk management. The book is divided into three parts: the first part introduces the crisis in risk management; the second deals with why some popular risk management practices are flawed; the third discusses what needs to be done to fix these. My review covers the main points of each section in roughly the same order as they appear in the book. The crisis in risk management...
Words: 3167 - Pages: 13
...Nairobi CBD Campus Department: Human Resource Development Course: MSc. Project Management. HEPM 3111: PROJECT QUALITY &RISK MANAGEMENT Assignment 2: Summary of Articles Estimations in Project Management In essence, estimates are forecasts of the future; unfortunately, people are not very good at forecasting. While it is difficult to make forecasts of natural phenomena such as the weather; it is even harder to make forecasts of any processes that include people, their knowledge and behavior. Project management is one of these processes. Estimation is a very important step in modeling and decision analysis. Without proper assessments of project duration, finish time, cost, resources, success rate and other parameters, it is almost impossible to select a proper alternative and ultimately make a good decision. Accurate estimation cannot be done without valid inputs. The information for estimations can only come from two sources: 1) Historical data or data about previous similar projects. This data can be captured in the project manager’s brain or obtained as a result of data analysis. 2) Measurements of the current project’s performance. Analysis of current project performance project makes is possible to forecast what will happen in the future. The human brain processes this information extremely fast using certain simplification techniques. In many cases, they work very well, in others they can lead to systemic mistakes or biases e.g. ...
Words: 2912 - Pages: 12
...in a risk management plan? A risk management plan documents the procedures for managing risk throughout the project and must address: Methodology – how will it be preformed on the project also what tools and data sources are available and appropriate. Roles and Responsibilities – who’s doing what task and providing deliverables related to risk management Budget and Schedule – estimated cost and schedule for performing the risk activities Risk Probability – how will each risk be dealt with and the impact of the risk Risk documentation – reporting formats and processes for risk management activities 5. Describe how to us a probability/impact matrix and the top ten risk item tracking approaches for performing qualitative risk analysis how could you use each technique on a project. Probability/impact matrix – lists the probability of a risk occurring and the impact of the risk. First they will list all risk that can come up during the project then they will rate them due to the probability of there chance to happen and on the impact they could have to the project. Then will put this in the chart in the respected places example high probability low impact or low probability high impact a total number of 9 squares can be filled in with these risks. You can use this technique on a project for example the software you use is the risk higher or lower then others what’s the probability and impact. Top Ten Item Tracking – qualitative risk analysis tool it...
Words: 718 - Pages: 3
...commercial activity involving taking the take the future of an area and trying to shape it needs of future generations and the ambition to make it successful merchandise in the real estate marketplace and thus it is a risky market venture. The paper, therefore, seeks to link the use explicitly of mathematical computation methods used in real estate to how they help manage sales of recently constructed assets. The cost of construction is estimated by the internal area info included in the contract records and from available gross construction cost rates. The most commonly adopted approaches are the binomial models, Black and Scholes and Monte Carol stimulation form the basis of the paper. The motivation for this project is set out more clearly and the computation study methods used in the real estate brokerage industry. Keywords Real estate, Monte Carlo simulations, interpolation, forecasting, Binomial models and Black and Scholes models Introduction Real estate business is the production plant of our cities that converts unproductive land to town space used for various activities by different people. Real estate development shapes the attractiveness of the places we devote so much time in and can substantially develop the quality of life. Growth binds large quantities of financial investment into a fixed asset though it is not granted that the proceedings will be greater than the investment. The commercial success is dependent on uncertain cost and undefined revenues and to achieve...
Words: 2089 - Pages: 9
...Monte Carlo Simulation Using RiskSim 9 9.1 RISKSIM OVERVIEW RiskSim is a Monte Carlo Simulation add-in for Microsoft Excel (Excel 97 and later versions) for Windows and Macintosh. RiskSim provides random number generator functions as inputs for your model, automates Monte Carlo simulation, and creates charts. Your spreadsheet model may include various uncontrollable uncertainties as input assumptions (e.g., demand for a new product, uncertain variable cost of production, competitor reaction), and you can use simulation to determine the uncertainty associated with the model's output (e.g., annual profit). RiskSim automates the simulation by trying hundreds of what-ifs consistent with your assessment of the uncertainties. To use RiskSim, you (1) create a spreadsheet model (2) optionally use SensIt to identify critical inputs (3) enter one of RiskSim's twelve random number generator functions in each input cell of your model (4) choose Tools | Risk Simulation from Excel's menu (5) specify the model output cell and the number of what-if trials (6) interpret RiskSim's histogram and cumulative distribution charts. RiskSim facilitates Monte Carlo simulation by providing: Twelve random number generator functions Ability to set the seed for random number generation Automatic repeated sampling for simulation Frequency distribution of simulation results Histogram and cumulative distribution charts All of RiskSim’s functionality,...
Words: 4374 - Pages: 18
...EBMA Level 8 Diploma in strategic Business Research and Leadership Direction Unit Title: Strategic Financial Analysis and Planning Table of Contents Executive Summary 3 1.Critique and evaluate research ....... 4 2.Critically apply modern financial tools 6 3.Use main types of investment appraisal tools 8 4.Critically evaluate the importance of research 10 References 11 Executive Summary The decision making of management is very crucial and involves various analysis to be performed. There are various ratios and methods that can be useful for mitigating the risks and increasing the expected returns with investments. The financial forecast is a mix of the behaviour, perception of management alongwith various techniques used for analysis of the different options available. Critique and evaluate research in financial theory and apply that research for decision making process 1.1 Describe the economic theory of choice as an illustration under certainty. The rational behind the economic theory of choice is to choose out of certain economic outcomes and representing the preferences through maximisation of the utility function of the outcomes. As per the von Neumann-Morgenstern expected utility model (1953), which is the workhorse of recent economics, the choices are made by people, so as to get the maximum utility. These preferences are based on intuition, self interest, past experiences etc...
Words: 3819 - Pages: 16
...identify the level of pricing that they will use. Setting the price too low may attract a lot of customers but may also be disadvantageous to the profit of the business. The business may also set the price too high to get a better profit figure but will also consequently risk lower demand for their product. Aside from the sales level and the pricing, to be able to properly use capital budgeting, businesses should also know the cost of the investment that they will potentially pursue. Moreover, the business should also know whether such an investment will have a salvage value or not at the end of its planned duration of use. All of these data should be available to the company so that a business can properly use capital budgeting...
Words: 2625 - Pages: 11
...APPENDIX P: Project Costs and Schedule Risk Analysis Report LCA CONVEY ATCHAFALAYA RIVER WATER TO NORTHERN TERREBONNE MARSHES AND MULTIPURPOSE OPERATION OF THE HOUMA NAVIGATION LOCK FEASIBILITY STUDY FOR ST. LOUIS DISTRICT, ST. LOUIS, MO Prepared for: St. Louis District, St. Louis, MO __ Prepared by: Paige Scott __________________ Date: __03 May 2010 ________ TABLE OF CONTENTS EXECUTIVE SUMMARY ................................................................................................ 1 1. PURPOSE ................................................................................................................. 3 2. BACKGROUND......................................................................................................... 3 3. REPORT SCOPE ...................................................................................................... 3 3.1 Project Scope .................................................................................................... 4 3.2 USACE Risk Analysis Process .......................................................................... 4 4. METHODOLOGY/PROCESS .................................................................................... 5 4.1 Identify and Assess Risk Factors ....................................................................... 6 4.2 Quantify Risk Factor Impacts ............................................................................. 7 4.3 Analyze Cost Estimate and Schedule...
Words: 6816 - Pages: 28
...com/q/bus-519-complete-course-bus519-complete-course/22300 http://workbank247.com/q/bus-519-complete-course-bus519-complete-course/22300 BUS 519 Week 1 Discussion "What is Risk?" Please respond to the following: * There are three (3) schools of thought regarding risk. The first considers the positive and negative aspects of risk, but sees them as separate. The second group believes that there are benefits from treating threats and opportunities together, while the third school does not label uncertainties, but addresses uncertainty as part of “doing the job.” Argue the value of having a risk strategy despite the cost associated with it. Include an example to support your response. Provide a rationale for your selection and determine how this approach helps a project to be successful. BUS 519 Week 2 Discussion "Need for Risk Management" Please respond to the following: * There are four (4) critical success factors that are important for effective risk management: supportive organization; competent people; appropriate methods, tools and techniques; and simple, scalable process. Determine three (3) obstacles for an organization to manage risk effectively. Suggest strategies from the perspective of a project manager to avoid the obstacles. BUS 519 Week 3 Discussion "Project Initiation" Please respond to the following: * Using the “Stakeholder Analysis Template” (Appendix B2 in the Hillson and Simon text) for a company that you currently work for or you are familiar with, determine...
Words: 2421 - Pages: 10
...com/q/bus-519-complete-course-bus519-complete-course/22300 http://workbank247.com/q/bus-519-complete-course-bus519-complete-course/22300 BUS 519 Week 1 Discussion "What is Risk?" Please respond to the following: * There are three (3) schools of thought regarding risk. The first considers the positive and negative aspects of risk, but sees them as separate. The second group believes that there are benefits from treating threats and opportunities together, while the third school does not label uncertainties, but addresses uncertainty as part of “doing the job.” Argue the value of having a risk strategy despite the cost associated with it. Include an example to support your response. Provide a rationale for your selection and determine how this approach helps a project to be successful. BUS 519 Week 2 Discussion "Need for Risk Management" Please respond to the following: * There are four (4) critical success factors that are important for effective risk management: supportive organization; competent people; appropriate methods, tools and techniques; and simple, scalable process. Determine three (3) obstacles for an organization to manage risk effectively. Suggest strategies from the perspective of a project manager to avoid the obstacles. BUS 519 Week 3 Discussion "Project Initiation" Please respond to the following: * Using the “Stakeholder Analysis Template” (Appendix B2 in the Hillson and Simon text) for a company that you currently work for or you are familiar with, determine the...
Words: 2422 - Pages: 10
...com/q/bus-519-complete-course-bus519-complete-course/22300 http://workbank247.com/q/bus-519-complete-course-bus519-complete-course/22300 BUS 519 Week 1 Discussion "What is Risk?" Please respond to the following: * There are three (3) schools of thought regarding risk. The first considers the positive and negative aspects of risk, but sees them as separate. The second group believes that there are benefits from treating threats and opportunities together, while the third school does not label uncertainties, but addresses uncertainty as part of “doing the job.” Argue the value of having a risk strategy despite the cost associated with it. Include an example to support your response. Provide a rationale for your selection and determine how this approach helps a project to be successful. BUS 519 Week 2 Discussion "Need for Risk Management" Please respond to the following: * There are four (4) critical success factors that are important for effective risk management: supportive organization; competent people; appropriate methods, tools and techniques; and simple, scalable process. Determine three (3) obstacles for an organization to manage risk effectively. Suggest strategies from the perspective of a project manager to avoid the obstacles. BUS 519 Week 3 Discussion "Project Initiation" Please respond to the following: * Using the “Stakeholder Analysis Template” (Appendix B2 in the Hillson and Simon text) for a company that you currently work for or you are familiar with, determine the...
Words: 2422 - Pages: 10
..."Project Risk Management" Please respond to the following: * Describe some of the tools and techniques that you can use as a project manager to mitigate risk in your projects. Support your response. * Provide realistic examples of each of the risk response strategies for both negative and positive risks. According to Schwalbe, risks can be assessed qualitatively or quantitatively. Tools for qualitative risk analysis include a probability/impact matrix and the Top Ten Risk Item Tracking Technique. Tools for quantitative risk analysis include decision trees and Monte Carlo simulation. Expected monetary value (EVM) uses decision trees to evaluate potential projects based on their expected values. Simulations are a more sophisticated method for creating estimates to help you determine the likelihood of meeting specific project schedule or cost goals. Sensitivity analysis is used to show the effects of changing one or more variables on an outcome. The four basic response strategies for negative risks are avoidance, acceptance, transference, and mitigation. Risk avoidance involves eliminating a specific threat or risk. A project team may decide to continue using a specific piece of hardware because they know it will work. Risk acceptance means accepting the consequences of a risk, should it occur. A project team can take an active approach to risk by having a backup plan if they cannot get approval for a specific site for a meeting. Risk transference is shifting the consequences...
Words: 796 - Pages: 4
...com/q/bus-519-complete-course-bus519-complete-course/22300 http://workbank247.com/q/bus-519-complete-course-bus519-complete-course/22300 BUS 519 Week 1 Discussion "What is Risk?" Please respond to the following: * There are three (3) schools of thought regarding risk. The first considers the positive and negative aspects of risk, but sees them as separate. The second group believes that there are benefits from treating threats and opportunities together, while the third school does not label uncertainties, but addresses uncertainty as part of “doing the job.” Argue the value of having a risk strategy despite the cost associated with it. Include an example to support your response. Provide a rationale for your selection and determine how this approach helps a project to be successful. BUS 519 Week 2 Discussion "Need for Risk Management" Please respond to the following: * There are four (4) critical success factors that are important for effective risk management: supportive organization; competent people; appropriate methods, tools and techniques; and simple, scalable process. Determine three (3) obstacles for an organization to manage risk effectively. Suggest strategies from the perspective of a project manager to avoid the obstacles. BUS 519 Week 3 Discussion "Project Initiation" Please respond to the following: * Using the “Stakeholder Analysis Template” (Appendix B2 in the Hillson and Simon text) for a company that you currently work for or you are familiar with, determine...
Words: 2421 - Pages: 10
...com/q/bus-519-complete-course-bus519-complete-course/22300 http://workbank247.com/q/bus-519-complete-course-bus519-complete-course/22300 BUS 519 Week 1 Discussion "What is Risk?" Please respond to the following: * There are three (3) schools of thought regarding risk. The first considers the positive and negative aspects of risk, but sees them as separate. The second group believes that there are benefits from treating threats and opportunities together, while the third school does not label uncertainties, but addresses uncertainty as part of “doing the job.” Argue the value of having a risk strategy despite the cost associated with it. Include an example to support your response. Provide a rationale for your selection and determine how this approach helps a project to be successful. BUS 519 Week 2 Discussion "Need for Risk Management" Please respond to the following: * There are four (4) critical success factors that are important for effective risk management: supportive organization; competent people; appropriate methods, tools and techniques; and simple, scalable process. Determine three (3) obstacles for an organization to manage risk effectively. Suggest strategies from the perspective of a project manager to avoid the obstacles. BUS 519 Week 3 Discussion "Project Initiation" Please respond to the following: * Using the “Stakeholder Analysis Template” (Appendix B2 in the Hillson and Simon text) for a company that you currently work for or you are familiar with, determine the...
Words: 2422 - Pages: 10
