Atack of the Black Swan

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Atack of the Black Swan

  1. 1. An Introduction to Risk Assessment<br />Steven Lipton M.Ed. LEHP, CP-FS<br />President , Biotest Services Inc. <br />Vice President, Operations Quality, Scientific Device Laboratory Inc.<br />
  2. 2. Objectives <br />Define risk<br />Identify the risk within a process, product or event. <br />Indentify the three major risk levels<br />Create a risk analysis chart<br />Identify and evaluate actions concerning potential Black Swans.<br />
  3. 3. What is Risk<br />A relationship between<br />Likeliness of an event<br />Impact of that event<br />
  4. 4. Impact<br />May be Positive or negative<br />WIN!!!<br />LOSE!!!<br />
  5. 5. Risk Management<br />Outside of finance, risk management generally deals with negative impacts.<br />
  6. 6. A simple dice game<br />Roller rolls 5 times<br />Roller Pays Bank $1 on rolls of 3,4,5<br />Bank Pays Roller $1 on rolls of 1,2,6<br />
  7. 7. A simple dice game<br />Roller rolls 5 times<br />Roller Pays Bank $1 on rolls of 5,6,7,8,9<br />Bank Pays Roller $1 on rolls of 2,3, 4,10,11,12<br />
  8. 8. Possible impacts<br />Lose<br />Low: $1<br />Moderate: $3<br />High: $5<br />Win<br />Low: $1<br />Moderate: $3<br />High: $5<br />
  9. 9. Probability<br />High - greater than 50% chance P(A)>0.50<br />Medium– 25% to 50% 0.25 ≤P(A) ≤ 0.50<br />Medium Low – 13% up to 25% 0.13 ≤ P(A) ≤ 0.25<br />Low - 13% P(A)<0.13<br />
  10. 10. Risk Table<br />I Just don’t want to lose!!!!<br />
  11. 11. Risk Table<br />
  12. 12. Types of risk<br />Intolerable risk - IR<br />Alarm or As Low as Reasonably Practical (ALARP) - AL<br />Broadly acceptable – BA<br />
  13. 13. Risk Table<br />
  14. 14. Risk Table<br />
  15. 15. Risk Table<br />
  16. 16. Risk Table<br />
  17. 17. Risk Table<br />
  18. 18. Risk Table<br />
  19. 19. Risk Table<br />
  20. 20. Risk Table<br />
  21. 21. Risk assessment Form<br />
  22. 22. A simple dice game<br />Based on evidence for 1-die game, assume even odds.<br />WAIT!!! There are really only 11 possibilities, not 12! P for dealer is (5/11)- 45%/throw, P for player is (6/11) 54%<br />
  23. 23. A simple dice game<br />Lose 5 – 1.8%  P1<br />Lose 3 – 11.6%  P1<br />Lose 1 – 27.1% P3<br />Lose 0 – 59.5%P5<br />
  24. 24. Risk assessment Form<br />
  25. 25. A simple dice game<br />Roller rolls 5 times<br />Roller Pays Bank $1 on rolls of 5,6,7,8,9<br />Bank Pays Roller $1 on rolls of 2,3, 4,10,11,12<br />Now Play the game!!!<br />
  26. 26. Class Results<br />
  27. 27. Probability<br />Some events are more likely to happen than others<br />
  28. 28. Simulation Results<br />
  29. 29. A sucker bet<br />
  30. 30. Original Risk Assessment<br />
  31. 31. Revised Risk for Probability<br />
  32. 32. Risk Table <br />The Black Swan<br />
  33. 33. The Black Swan<br />Nicholas Nassim Taleb (2006)<br />A reference to Europeans who only saw white swans and thus thought all swans were white – until they got to Australia. <br />A black swan event is a High impact, Low probability event. <br />After a Black Swan event, the event looks like it was inevitable with a simple, obvious explanation. <br />
  34. 34. Changing the rules<br />If roller wearing anything white, the payoffs to bank and roller switch. <br />What happens?<br />
  35. 35. Control Measures<br />Control measures change the impact or the probability of an outcome, and thus change the risk. <br />
  36. 36. Control Measures<br />Control measures are found by determining the root cause, and finding a way to prevent minimize or eliminate that root cause<br />
  37. 37. Revised Probabilities & Risk<br />
  38. 38. Revised Probabilities & Risk<br />
  39. 39. Stopping Black swans <br />Be creative<br />Expert advice is anchored to the means, not the extremes<br />Examine for false impacts and probabilities<br />Examine for false risk<br />Examine for hidden risk<br />Apply control measures once found<br />
  40. 40. Stopping Black Swans<br />You can’t stop all Black Swans<br />When you do stop one, virtually no one will know. (Jonah’s Dilemma) <br />
  41. 41. Risk assessment charts<br />Brainstorm all possible events<br />Brainstorm all possible outcomes<br />Place on form and calculate risk<br />Identify root causes<br />If there is a control measure for the root cause, note it. <br />If there is a significant residual risk, see if that is another event/outcome. <br />
  42. 42. Brainstorming<br />Write down all possibilities for the topic without any editing or rejections<br />Organize the results <br />
  43. 43. Brainstorming<br />Write down all possibilities for the topic without any editing or rejections<br />Organize the results <br />
  44. 44. A Short Risk Analysis<br />Step 1: Decide in your groups a case<br />Food borne outbreak<br />Terrorist event<br />Natural disaster<br />Epidemic<br />Step 2: Brain storm all events that could happen during a topic.<br />
  45. 45. Step 3: Events and Effect<br />
  46. 46. Define Impact<br />
  47. 47.
  48. 48. Set up risk table<br />
  49. 49. Step 7: Calculate your risk<br />
  50. 50. Step 8: Find the root cause<br />
  51. 51. Step 9: Control measure<br />
  52. 52. Step 3: Calculate residual risk<br />
  53. 53. Questions?<br />Steven Lipton <br />Biotest Services<br />411 East Jarvis Ave Des Plaines IL 60018<br />steven.j.lipton@gmail.com<br />Steve@scientificdevice.com<br />Twitter: @Biotest<br />http://www.biotestservices.com/risk.php<br />

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