Synthetic Risk Management - Aditya Yadav

1. ―Running an Agile Fortune 500 Company‖
Aditya Yadav, aditya.yadav@gmail.com
in.linkedin.com/in/adityayadav76
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2. *
*A Typical Global Company
*Fortune 500/1000
*200 Divisions
*40 Countries
*25000 Employees

3. @ Acme Inc.
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4. *
*Original Question ―How do we Manage Risk?‖
*The Correct Question - ―We‘ll come to that….
But before that lets just see – How NOT TO
Manage Risk… aka Synthetic Risk
Management!!!‖

5. And The Philosophy Behind The Answer
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6. *
1. Credit Risk
2. Country Risk
3. Market Risk
4. Operational Risk
5. Insurance Risk
6. Business Risk (Including Tax & Strategic Risk)
7. Reputational Risk
8. Liquidity Risk

7. *
*Avoid risk — Change plans to circumvent the problem
*Control/Mitigate risk — Reduces impact or likelihood
(or both) through intermediate steps
*Accept risk — Take the chance of negative impact (or
auto-insurance), eventually budget the cost (e.g. via a
contingency budget line)
*Transfer risk — Outsource risk (or a portion of the risk
- Share risk) to third party(s) that can better manage
the outcome. This is done e.g. financially through
insurance contracts or hedging transactions, or
operationally through outsourcing an activity

8. *
1. Ignore Risk – Pretend it doesn‘t exist
2. Downplay Risk – Claim its not Risky
3. Underestimate Liabilities & Possible Downside Loss
4. Mutate Risk – From one form to another
5. Hide Risk - Make it incomprehensible or make everything complicated or simply omit it
6. Pretend - to have the capability to handle Risk when it comes up. But you are a Strategy
by Design Firm and have no Emergent Strategy capabilities
7. Redesign Risk Probabilities – by changing the game dynamics/probabilities on paper
(Manipulation)
8. (Re) Distribute Risk – e.g. Among the Impacted Target(s)
9. Create a Risk Pyramid or a Risk Graph/Network – Convert Individual Risk into Systemic Risk
10. (Re) Package Risk – Without Changing the underlying Risk in any way
11. Say – ―Lets do this…. Just this once… nothing would go wrong would it?‖
12. Justification: Everyone else is doing it… we will manage somehow if something goes wrong
later
13. Delay Risk – Stalling Strategy!

9. *
14. Accelerate Risk – Yes you do that and it‘s a great strategy!
15. HIPPO over rules every analysis
16. Predict that extreme events wont happen (as long as the time we need to save our
personal behinds)
17. Prove: by looking at the past => thereby forecasting ALL(!!!) future risks
18. Your Strategy depends on ‗Blaming‘ someone else!
19. You Strategy is to ‗Resign‘ just in time!!!
20. Extremely high precision and extremely high inaccuracy
21. Use (Seemingly Quantitative) but absolutely Qualitative measures like High, Medium, Low
and then Aggregating those scores Mathematically. Which is complete Nonsense!!! Yay!!!
22. Document everything Extremely elaborately and then do nothing about it. Yay!!!
23. Risk Audit is your only Strategy
24. Underestimate the Redundancy & Safety Budgets!!! And make everything synthetically fit
into what exists of them already so that you don‘t have to do anything more
25. Pick Randomly between 3σ & 7σ for your analysis instead of Analyzing using all of 2σ , 4σ
, 8σ , 16σ , 32σ

10. *
Aditya!!!