* denotes required fields

Why Are You Afraid of the "R" Word?

Mention the word “risk” and every businessman you know starts to shake in his boots. But exactly how did risk become generally accepted as the horrifying concept it is today? And even more so, why are you and your company so afraid of risk? You’ve heard it time and time again, but honestly, there’s nothing to fear but fear itself. You’ll see how to get over your fear of risk by using a concept called Riskonomics^TM to help you determine the real possibilities involved with risk.

Risk is a concept that denotes a potential negative impact to an asset or some characteristic of value that may arise from some present process or future event. In everyday usage, risk is often used synonymously with the probability of a known loss. Riskonomics^TM is a systematic use of available information to determine how often specified events may occur and the magnitude of their consequences. In other words, Riskonomics^TM makes risk a little less scary but providing answers, at least better estimates, to some of the unknowns. Riskonomics^TM consists of a two-part analysis: qualitative and quantitative.  (make this stand out)

The qualitative portion serves as a judge of an organization’s risk to threats. This is determined based on judgment, intuition and the experience. This is done rather than assigning real numbers to the possible risks and their potential loss margins. (why?) To make the risk data gathering more objective and less subjective.

The quantitative portion incorporates numerical estimated of frequency, or probability, and consequence.

In practice, a sophisticated analysis of risk requires extensive data which are expensive to acquire or often unavailable.

Now that we’ve covered the risk portion of Riskonomics^TM, you’re probably wondering how economics plays into this concept. In our concept, economics uses experimental methods to evaluate theoretical predictions of economic behavior, and much like the risk portion we discussed earlier, it too is a two-part concept:

Positive economics is the description and explanation of economic phenomena. It focuses on facts and cause-and-effect relationships . In short, positive economics describes “what is.” It also includes the development and testing of economic theories.

Normative economics incorporates value judgments about what the economy should be like or what particular policy actions should be recommended to achieve a desirable goal i.e. “what ought to be.” Normative economics looks at the desirability of certain aspects of the economy.

You’re probably wondering how to compile all this information together to get the real benefit. The answer is the Riskonomics^TM Simulator. This is a tool that helps build a risk table from the schedule outlining the risk each component of the production process and categorizes each risk. The Simulator is a computer program that models a real-world situation and imitates the dynamic behavior of a real system. Using this tool helps your organization to build plausible views of a smaller number of different possible futures for operating in conditions of high uncertainty.

The Riskonomics^TM Simulator was developed by Wainscott Finch Associates as a tool to help organizations understand the relevance of risk to their organizations and how to prepare for those risks which affect them most. For more information on Riskonomics^TM or the Riskonomics^TM Simulator contact an associate for a risk evaluation of your next project.