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Risk engineering decision tools for risk management support
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Risk engineering decision tools for risk management support

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Marcello FORTE, Emanuele SALVADOR

Marcello FORTE, Emanuele SALVADOR

AXA Matrix Risk Consultants, Italy, Republic of

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Risk engineering decision tools for risk management support Risk engineering decision tools for risk management support Presentation Transcript

  • IDRC DAVOS 2012 Davos, 29/08/2012 Marcello Forte marcello.forte@axa-matrixrc.com Emanuele Salvador emanuele.salvador@axa-matrixrc.comRISK ENGINEERING DECISION TOOLS FOR INDUSTRIAL RISK MANAGERS SUPPORT
  • « a snap-shot » AXA MATRIX Risk Consultants is the AXA Group entity and brand which delivers world-wide services for the development and implementation of consulting products and industrial risk analysis.  More than 150 Risk Consultants located in 18 countries across 4 continents  Specialized in multidisciplinary Risk Assessment and Risk Management support  Over 35 years of risk consulting experience and collaboration with the most important world-wide Corporate Clients  Over 200 Corporate CustomersDavos - 29/08/2012
  • Risk Management support Risk Managers’needs in order to:  Protect all Company assets. MULTI-  Guarantee business continuity by PERIL RISK ANALYSIS preserving brand value and market CONTROL EXPOSURES AND share. REDUCE  Optimize Company risk-transfer. PROBABILITY AND SEVERITY OF  Provide Balance Sheet protection. POTENTIAL LOSSES LOSS PREVENTION INVESTMENTS OPTIMIZATION For optimised Risk ManagementDavos - 29/08/2012
  • Risk Management: a continuous “(r)evolution” External factors set off insurance market difficulties, amplified for 2001-2003 those companies without adequate Risk Management structures Global financial crisis forces 2007-2008 Companies to adopt reliable Risk Management actions Awareness of a more 2010 integrated Risk Management approachDavos - 29/08/2012
  • Enterprise Risk Manager (ERM) This new trend generates the need to implement the Risk Management organization, by concentrating all the RM functions inside one structure, where they can interact between each other. This structure will be coordinated by the “Enterprise Risk Manager” (ERM), who reports directly to Company Management Board. Industrial Risk Engineering (pure risks)Davos - 29/08/2012
  • Analysis objectivation and quantification Working into a multidisciplinary context, it’s vital that: • analysis methods and criteria are as homogenous as possible with the ones used in other areas (financial, strategic, operational ecc). • analysis evolve from qualitative to quantitative parameters: •Qualitative Insurance Manager Reliability of the outputs Complexity level (cost) Applicability on a large scale •Semi-Quantitative Risk Manager •Quantitative Operational Risk ManagerDavos - 29/08/2012
  • AXA MATRIX: Our “traditional” decision support tools ACCESS@RISK© Dedicated on-line portal VISIORISK™ Visualization & Cumulative Risk Analysis CITRAN™ Investments optimization ISORISK™ • Fire Risk mapping • Machinery Breakdown • Theft CONSTRUCTION@RISK • NAT-CAT risks •Preliminary analysis of new projects PROPERTY@RIS •Risk monitoring during construction K GEAR™ and commissioning phases Tool to collect data in self-assessment Benchmark with peers SCAN@RISK™ENVIRONMENT@RISK Environmental Risk Analysis • • Loss Prevention & SustainabilityDavos - 29/08/2012
  • AXA MATRIX: ISO@RISK ACCESS@RISK VISIO@RISK CITRAN ISO@RISKPROPERTY@RISK CONSTRUCTION@RISK GEAR SCAN@RISK ENVIRONMENT@RISKDavos - 29/08/2012
  • ISORISK™: definition ISORISK™ is a graphic tool that aims to:  Share immediately with the Customer the risk level existing at its premises  Benchmark the different production plants, regardless of business activity sector  Identify the priority plants to be implemented  Simulate the effect of prevention and protection implementationsDavos - 29/08/2012
  • ISORISK™: basic methodology R = S x V R = Risk. S = Severity: assessment of loss arising from harmful events, typically expressed in economic terms. V = Vulnerability, a measure of the probability of occurrence of a major loss. Since it is not possible to fix any “numerical” value concerning an industrial plant made up of thousands of parameters, an alternative value called “Vulnerability” is used. It is based on the evaluation, and following processing, of some typical parameters (indicative) of frequency of claim occurrence. Vital Trivial Few ManyDavos - 29/08/2012
  • ISORISK™: methodology ISORISK™ objective is to define Severity and Probability parameters for each plant of the industrial group, in order to display it on a global risk map for each assessed risk. For a given peril 80 Plant E 70 Plant A 60 Area C Plant B 50 Plant C Severity [M€] Plant D 40 Plant C Area B Plant E 30 Limit between A - B areas 20 Plant B Plant D Limit between B - C areas 10 Area A Plant A 0 0 10 20 30 40 50 60 70 80 90 100 VulnerabilityDavos - 29/08/2012
  • ISORISK™: Example of FIRE vulnerability assessement Parameters and values, as well as the algorithm that provides vulnerability value, depend on: - risk under investigation - occupancy - company’s objectives Example of Fire vulnerability assessment concerning any industrial site (warehouses or production plants): it is based on 8 parameters, responsible for the variation of harmful events occurrence frequency.Davos - 29/08/2012
  • ISORISK™: Actions simulation through Isorisk map ISORISK MAP Actions simulation 80 Simulation 1 Plant E 70 60 50 Severity 40 Simulation 2 30 20 10 0 20 30 40 50 60 70 80 90 100 VulnerabilityDavos - 29/08/2012
  • Risk Mapping… … “Qualitative” VS “Semi-Quantitative” analysis Transition from a qualitative to a semi-quantitative approach allows to:  benchmark different plants with objective criteria;  develop a set of actions for the RM process;  define risk control strategies Qualitative Quantitative 50 40 Severity (Mill €) Gravité (en M EUR) 30 20 10 0 0 10 20 30 40 50 60 70 80 90 100 Vulnérabilité VulnerabilityDavos - 29/08/2012
  • AXA MATRIX: CITRANTM ACCESS@RISK© VISIORISK™ CITRAN™ ISORISK™PROPERTY@RISK CONSTRUCTION@RISK GEAR™ SCAN@RISK™ ENVIRONMENT@RISKDavos - 29/08/2012
  • CITRAN™: definition Critical investments to reach acceptable NLE (CITRAN ™) While the ISORISKTM mapping system is created to identify the “top risks” and associated “top improvements”, the CITRANTM curves point out the impact of each loss prevention recommendation (Loss Expectancy reduction) and the required investment (cost to complete). . 60 Rec. N. 1 50 Rec. N. 2 40 Rec. N. 3 NLE [M€] 30 Rec. N. 4 20 Rec. N. 5 Rec. N. 6 10 Normal Loss Expectancy 0 0 10 20 30 40 50 60 70 80 Investments [K€] Cost to completeDavos - 29/08/2012
  • CITRAN™ : methodology 60 Rec. N. 1 Initial Loss Expectancy 50 Rec. N. 2 Rec. N. 3 Delta LE Rec. N. 3 Post investment Loss Expectancy 40 NLE [M€] 30 Rec. N. 4 Rec. N. 4 20 Rec. N. 5 Rec. N. 6 Rec. N. 5 10 Rec. N. 6 Cost of Recommandations 1 + 2 0 0 10 20 30 40 50 60 70 80 Investments [K€]By considering an investment based on recommendation 1 and 2, CITRAN curve shifts to the left side,according to a quantity equal to the investment and later it shifts to the bottom side according to the differencebetween Loss Expectancy based on recommendation 1 and 2.The slope of the curve represents the measure of action effectiveness; it is the resultof loss expectancy mitigation and recommendation implementation cost ratio.Davos - 29/08/2012
  • ISORISK™ & CITRAN™ : an application Example of FIRE plant grading – current situation Citran - Current Situation 100 80 Rec 01 NLE Before [M€] 60 Rec 02 40 Rec 03 Rec 04 Rec 05 20 Rec 06 Rec 07 0 0 100 200 300 400 500 Proposed Loss Prevention Investment [k€]Davos - 29/08/2012
  • ISORISK™ & CITRAN™ : an application Example of plant grading – Simulation of Recs. n° 1-3 Citran - Simulation of Recs. 01-03 100 80 Rec 01 NLE Before [M€] 60 Rec 02 Rec 02 Rec 03 Rec 03 40 Rec 03 Rec 04 Rec 04 Rec 05 Rec 05 20 Rec 04 Rec 05 Rec 06 Rec 06 Rec 06 Rec 07 Rec 07 Rec 07 0 0 100 200 300 400 500 Proposed Loss Prevention Investment [k€]Davos - 29/08/2012
  • RISK ENGINEERING DECISION TOOLS FOR RISK MANAGER SUPPORT: CONCLUSIONS ISORISK MAP Actions simulation The development of new means of communication and 90 80 Simulation 1 synthesis underlines on one hand how much it is important to 70 Simulation 2 Plant E use quantitative tools for different risks analysis and, on the 60 Plant E Simulation 1 Severity [M€] 50 Simulation 2 other one, the need for new synthesis and reporting Simulation 3 40 Series 1 30 Series 2 Simulation 3 methods for the risk management process. 20 10 0 0 10 20 30 40 50 60 70 80 90 100 Citran - Simulation of Recs. 01-03 Vulnerability 100 80 Rec 01 Output analysis reporting and communication should be possible NLE Before [M€] 60 Rec 02 Rec 03 Rec 02 Rec 03 as quickly as possible, in an increasingly efficient way: it is 40 Rec 03 Rec 04 Rec 05 Rec 04 Rec 05 important to use tools suitable to highlight, quickly and Rec 04 effectively, every detailed risk level concerning the plant and/or 20 Rec 05 Rec 06 Rec 06 Rec 06 Rec 07 Rec 07 Rec 07 0 0 100 200 300 400 Proposed Loss Prevention Investment [k€] 500 group of plants under control. The possibility of visualization, benchmarking and cross-data ensures a strict control over quality and reliability of the risk analysis information, amount of current and coming exposures, cost estimated necessary for their mitigation, cost/benefits ratio, quantifiable objectives definition about risk mitigation, thus resulting a tool suitable for risk management activity.Davos - 29/08/2012
  • IDRC DAVOS 2012 Davos, 29/08/2012 Thank you for your attention Do not hesitate to contact us for any explanation marcello.forte@axa-matrixrc.com emanuele.salvador@axa-matrixrc.comRISK ENGINEERING DECISION TOOLS FOR RISK MANAGER SUPPORT