catastrophic risks
TRANSCRIPT
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Catastrophic Risks
Are there Gaps in YourRisk Management Strategies?
Proudly Presents
Mark Aiello
Marsh Risk Consulting
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Overvie
! "e#ining Catastrophic Risk
! Accepting the Potential
! Measuring Catastrophic Risk
! Managing Catastrophic Risk
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$% "e#ining Catastrophic Risk
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&hat is Catastrophic Risk?
'o is a catastrophic event typically de#ined?
Common Descriptors
Global Disaster
Tragedy
Natural hazard
Accident Etc.
Common Events
Earthquake Tsunami
Hurricane
Terrorist attack
Plane crash Etc.
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Glo(al Catastrophic Risks
Do the criticalglobal risk issuesrank highly inyourorganization
Ho! arecatastro"hic risks
unique toindi#idualorganizations
$ource% &orld Economic 'orum( Global )isks *+,,
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Case Study
2010 Deepwater Horizon spillExample
&ould you consider this a catastro"hic e#ent
&ho !as this catastro"hic -or
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Re#ining the "e#inition
How do you define catastrophic risk
for your organization!uestion
De-inition is unique -or di--erent entities
ust align !ith tolerable ca"acity
)e"resents a !orst case scenario
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)% Accepting the Potential
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*gnoring the +lephant in the Room
/o! likelihoode#ents
Di--icult to "redict
Nebulous e#ents
Poorly de-ined
metrics
0om"le1( -ar
reaching im"acts
"ypical
#esponseChallenges
! *nactivity! Avoidance
! ,-orce #ield.
! O## the shel# / (este##orts planning
$utcome
! Poorly prepared#or ma0or incident
! 1ntested /improper plans
! Potential #or
compoundingimpact
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Accepting the Potential #or 2oss
! Accept that catastrophic riskscan happen
! 1nderstand and diligently 3uanti#ythe (road potential impact onyour organi4ation
! Plan appropriately
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5% Measuring Catastrophic Risk
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"etermine 6olera(le Capacity
Target 2utcome
3e.g. Earnings4
! 'o much cane a##ord to
lose?! At hat point
do e riskcontinuity o#operations?
56
Capital wiped out
Covenant breach
Profit warning
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easuring 0atastro"hic )isk
7alues
8m"act Path!ay
$cenario
0ritical Processes
9uanti-y the "otential im"act to the organization
De#elo" a ste"6!ise a""roach to -ollo! theinter6related im"acts
De#elo" credible e#ent scenarios
0onsider :the im"ossible;
De-ine critical "rocesses !ithin
the organization
7alues
8m"act Path!ay
$cenario
0ritical Processes
7alues
8m"act Path!ay8m"act Path!ay
$cenario$cenario
0ritical Processes0ritical Processes
9uanti-y the "otential im"act to the organization
De#elo" a ste"6!ise a""roach to -ollo! theinter6related im"acts
De#elo" credible e#ent scenarios
0onsider :the im"ossible;
De-ine critical "rocesses !ithin
the organization
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"e#ining Critical Processes
! &hat are the critical processes inyour organi4ation?
! &hat assets / processes / #unctions canyou not a##ord to lose?
! &here do multiple processes overlapor converge?
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0riticalProcesses
7alues
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$cenario$cenario
0riticalProcesses0riticalProcesses
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"e#ining Critical Processes
7alues
8m"actPath!ay
$cenario
0riticalProcesses
7alues
8m"actPath!ay8m"actPath!ay
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0riticalProcesses0riticalProcesses
0redit 000nloading at
0ustomer $ite
Dri#er $election
0riteriaDri#er Training Dri#er anual
0ustomer
?+@
Provides direction
Information sharing
Advising
Provides direction
Daily loads & deliveries
via on-board computer
Advises Repairs, etc.
Vehicle aintenance !ecure instructions from
dispatch
Drive to loading rac" to
load fuel per driver#s
manual
$op or bottom loaded
per driver#s manual
%alculate amount of
product Revie previous vehicle
inspection log
%hec" vehicle &
complete ne inspection
log 'pre-trip(
Repair any safetydefects
Vehicle operation
Road conditions
Delivery delays
echanical problems Accidents
)ire
Improper operation
'speeding, etc.(
*ses manifest to plan
daily delivery route
*nload at client location per driver#s
manual
%omplete daily shift report
Verify delivery tic"ets
2rdering( ser#ice( etc.
,+@
Delivery %rocess
0redit 000nloading at
0ustomer $ite
Dri#er $election
0riteriaDri#er Training Dri#er anual
0ustomer
?+@
Provides direction
Information sharing
Advising
Provides direction
Daily loads & deliveries
via on-board computer
Advises Repairs, etc.
Vehicle aintenance !ecure instructions from
dispatch
Drive to loading rac" to
load fuel per driver#s
manual
$op or bottom loaded
per driver#s manual
%alculate amount of
product Revie previous vehicle
inspection log
%hec" vehicle &
complete ne inspection
log 'pre-trip(
Repair any safetydefects
Vehicle operation
Road conditions
Delivery delays
echanical problems Accidents
)ire
Improper operation
'speeding, etc.(
*ses manifest to plan
daily delivery route
*nload at client location per driver#s
manual
%omplete daily shift report
Verify delivery tic"ets
2rdering( ser#ice( etc.
,+@
Delivery %rocess
Critical
Process
Critical
Process
Critical
Process
0redit 000nloading at
0ustomer $ite
Dri#er $election
0riteriaDri#er Training Dri#er anual
0ustomer
?+@
Provides direction
Information sharing
Advising
Provides direction
Daily loads & deliveries
via on-board computer
Advises Repairs, etc.
Vehicle aintenance !ecure instructions from
dispatch
Drive to loading rac" to
load fuel per driver#s
manual
$op or bottom loaded
per driver#s manual
%alculate amount of
product Revie previous vehicle
inspection log
%hec" vehicle &
complete ne inspection
log 'pre-trip(
Repair any safetydefects
Vehicle operation
Road conditions
Delivery delays
echanical problems Accidents
)ire
Improper operation
'speeding, etc.(
*ses manifest to plan
daily delivery route
*nload at client location per driver#s
manual
%omplete daily shift report
Verify delivery tic"ets
2rdering( ser#ice( etc.
,+@
Delivery %rocess
0redit 000nloading at
0ustomer $ite
Dri#er $election
0riteriaDri#er Training Dri#er anual
0ustomer
?+@
Provides direction
Information sharing
Advising
Provides direction
Daily loads & deliveries
via on-board computer
Advises Repairs, etc.
Vehicle aintenance !ecure instructions from
dispatch
Drive to loading rac" to
load fuel per driver#s
manual
$op or bottom loaded
per driver#s manual
%alculate amount of
product Revie previous vehicle
inspection log
%hec" vehicle &
complete ne inspection
log 'pre-trip(
Repair any safetydefects
Vehicle operation
Road conditions
Delivery delays
echanical problems Accidents
)ire
Improper operation
'speeding, etc.(
*ses manifest to plan
daily delivery route
*nload at client location per driver#s
manual
%omplete daily shift report
Verify delivery tic"ets
2rdering( ser#ice( etc.
,+@
Delivery %rocess
Critical
Process
Critical
Process
Critical
Process
0redit 000nloading at
0ustomer $ite
Dri#er $election
0riteriaDri#er Training Dri#er anual
0ustomer
?+@
Provides direction
Information sharing
Advising
Provides direction
Daily loads & deliveries
via on-board computer
Advises Repairs, etc.
Vehicle aintenance !ecure instructions from
dispatch
Drive to loading rac" to
load fuel per driver#s
manual
$op or bottom loaded
per driver#s manual
%alculate amount of
product Revie previous vehicle
inspection log
%hec" vehicle &
complete ne inspection
log 'pre-trip(
Repair any safetydefects
Vehicle operation
Road conditions
Delivery delays
echanical problems Accidents
)ire
Improper operation
'speeding, etc.(
*ses manifest to plan
daily delivery route
*nload at client location per driver#s
manual
%omplete daily shift report
Verify delivery tic"ets
2rdering( ser#ice( etc.
,+@
Delivery %rocess
0redit 000nloading at
0ustomer $ite
Dri#er $election
0riteriaDri#er Training Dri#er anual
0ustomer
?+@
Provides direction
Information sharing
Advising
Provides direction
Daily loads & deliveries
via on-board computer
Advises Repairs, etc.
Vehicle aintenance !ecure instructions from
dispatch
Drive to loading rac" to
load fuel per driver#s
manual
$op or bottom loaded
per driver#s manual
%alculate amount of
product Revie previous vehicle
inspection log
%hec" vehicle &
complete ne inspection
log 'pre-trip(
Repair any safetydefects
Vehicle operation
Road conditions
Delivery delays
echanical problems Accidents
)ire
Improper operation
'speeding, etc.(
*ses manifest to plan
daily delivery route
*nload at client location per driver#s
manual
%omplete daily shift report
Verify delivery tic"ets
2rdering( ser#ice( etc.
,+@
Delivery %rocess
Critical
Process
Critical
Process
Critical
Process
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"eveloping Scenarios
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Global
e#ents
0reati#ity
Credi&lecatastrophic
event
scenario
8ndustrye1"erience
8ndi#idual
e1"erience
'ocus on critical
"rocesses
0onsider !orst
case e#ents
Plausibility
Assume -ailure
o- controls Take :outside6in;
"ers"ecti#e
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"eveloping Scenarios
! 1se critical processes as a starting point
! -ocus on a managea(le num(ero# ma0or scenarios
! Consider all donstream e##ects
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*mpact Pathays
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$cenario
0riticalProcesses
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'mpact %athways(
A method o- systematically identi-ying
e#ent im"act
Describe detailed "rogression o- the risk e#ent
reak im"acts do!n across the #alue chain
0onsider de"endencies and inter6related
"rocesses
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*mpact Pathays
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$cenario
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)hy *se 'mpact %athways
/ogical( ste"!ise a""roach to risk e#aluation
Promotes reasonable estimates o- likelihoodand im"act
Allo!s -or the identi-ication and inclusion o-
interde"endencies o- "rocesses
8ncreases the credibility o- analysis results
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*mpact Pathays
7alues
8m"actPath!ay
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0riticalProcesses
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0riticalProcesses0riticalProcesses
)isk e#ent
Direct -inancial
/egal
)e"utation
2"erations
Etc.
$ccurrence 'mpact +reas 'mpact "ypes
0osts -or e1ternal
legal counsel
Budgement +RA +conomic Consulting%
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