The document discusses how analytics can support resilience. It argues analytics must quantify risks through modeling potential futures, characterize risk frequencies and impacts, and support all aspects of resilience including shocks, stresses, and strategic objectives. Analytics must be fit for purpose, simulate a full range of possibilities, and be well calibrated and validated against historical events.

1. 1Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
MEASURE
MANAGE
FINANCE
MODELS:
THE LANGUAGE
OF RESILIENCE
#ResilienceFinance
Daniel Stander | RMS
Istanbul | 5th October, 2018

2. 2Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
ALL MODELS ARE WRONG, …
…BUT SOME ARE USEFUL
DISCLAIMER #1
．．Но некоторые полезны
Все модели неверны ．．．

3. 3Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
AGENDA
▪ PURPOSE
▪ WELCOME KIT COMPONENTS
▪ BUDGET/COST
Каждое событие учит
нас новому
EVERY EVENT TEACHES
SOMETHING NEW
DISCLAIMER #2

4. 4Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 44Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
FUNDAMENTAL TO
STRATEGIC ACTION
#1 – Analytics are…

5. 5Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
Shock
Quantify Reduce Finance Precover
Strategy
FIVE PILLARS OF RESILIENCE

6. 6Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
Shock
Quantify Reduce Finance Precover
Strategy
LIKE EVERYTHING ELSE, IT BEGINS WITH ANALYSIS

7. 7Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 77Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
ANALYTICS MUST BE
FIT FOR PURPOSE
#2 – Analytics must…

8. 8Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
If you can't measure it,
you can't manage it
and you can't fix it
(whatever, wherever)

9. 9Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 99
INDICATORS

10. 10Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 1010
METRICS

11. 11Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 1111Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
SIMULATE FULL RANGE OF
POSSIBLE FUTURES
#3 – Analytics must…

12. 12Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
10 deaths in
100 years
CANNOT SAY THE WORST CASE WILL NEVER HAPPEN
200,000 deaths
in one afternoon

13. 13Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
WHY RMS MODELLING?
Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved.
extremes: infrequent and severe
+
historical techniques: don’t capture full range of possibilities
Ergo
such methods: inadequate to quantify resilience

14. 14Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 1414Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
История не является
хорошим прецедентом
для будущего
HISTORY =
INADEQUATE
PRECEDENT
FOR FUTURE

15. 15Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 1515Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
millions of versions
of next year
and future years
+
combinations of events
that haven’t occurred,
but could

16. 16Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 1616Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
CHARACTERIZE
FREQUENCY / SEVERITY
DISTRIBUTION OF IMPACT
#4 – Analytics must…

17. 17Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
STOCHASTIC
HAZARD
EXPOSURE
FINANCIAL
SIMULATED FUTURE?
HEIGHT OF THE WATER AT (X,Y)?
VULNERABILITY
HOW TRANSLATE TO ECONOMIC & HUMAN IMPACT?
WHAT, WHERE & HOW MUCH?
HOW RESISTANT TO SHOCK & STRESS?

18. 18Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
%
$
QUANTIFIED UNDERSTANDING
OF NET ECONOMIC IMPACT
OF POTENTIAL SHOCKS & STRESSES

19. 19Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 1919Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
WELL CALIBRATED
& VALIDATED
#4 – Analytics must be…

20. 20Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 202020
0
2
4
6
8
10
12
14
16
18
20
Ivan Katrina Rita Wilma Ike Sandy
Loss($USBillions)
NFIP Modeled
Actual vs. RMS Modeled
Actual Modeled
…and validated against each new event
Calibrated to historical loss experience…

21. 21Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 212121
SPEAK THE LANGUAGE
OF THE MARKET
#5 – Analytics must…

22. 22Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 2222Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
of the private market
uses RMS’ view
of risk +
resilience
Source: FEMA

23. 23Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 2323Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
ARTICULATE OBJECTIVES
IN THE FACE OF SHOCKS
& STRESSES
#6 – Analytics must…

24. 24Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
Unlikely
Ruin
Likely
Attrition $50bn
1.0%
0.1%
10%
$30bn$10bn
MUNICIPALITY’S RESILIENCE TODAY?
Today

25. 25Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
Unlikely
Ruin
Likely
Attrition
0.1%
10%
$30bn$10bn $50bn
1.0%
HOW, WHERE & WHY IS IT DETERIORATING?
Today
Inaction

26. 26Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
Unlikely
Ruin
Targets
Likely
Attrition $50bn
1.0%
0.1%
10%
$30bn$10bn
Today
Inaction
CAN YOU ARTICULATE SUCCESS?

27. 27Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
Unlikely
Ruin
Targets
Likely
Attrition
Gap #2
$50bn
1.0%
0.1%
10%
$30bn$10bn
Gap #1
Today
Inaction
WHICH RESILIENCE GAPS, WHEN AND HOW?

28. 28Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 2828Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
SUPPORT ALL FACETS
OF RESILIENCE
#6 – Analytics must…

29. 29Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
DIFFERENT INTERVENTIONS HAVE VERY DIFFERENT ROI…
…AND OPTIMAL SOLUTION IS VERY SENSITIVE TO GOALS
$0
$100
$200
$300
$400
$500
0%1%2%3%4%5%
ReductioninEconomic
Impact(MM)
Exceedance Probability
8ft is worth $350m @ 1%
4-6ft might suffice
to protect to 2%

30. 30Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
超越概率
当前状况
加固建筑物
加固并移民内陆
#2

31. 31Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
QUANTIFYING
RESILIENCE
DIVIDEND OF
NATURE
Increase in surge
loss without wetlands
Wetlands
prevented
$500m in
losses

32. 32Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018Copyright © 2016 Risk Management Solutions, Inc..
TIDAL GAUGE TRIGGER
WE ARE NOW IN A STRONGER POSITION SHOULD
WE FACE A LARGE-SCALE STORM-SURGE EVENT.
CHAIRMAN & CEO
NEW YORK TRANSIT AGENCY

33. 33Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018

34. 34Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 3434Copyright © 2016 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
DO A LOT WITH A LITTLE
#7 – Analytics must…

35. 35Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018
1. Build a
picture, tell
a story
2. Develop
greater
focus
3. Refine
analysis;
demand
more data
4. Reduce
uncertainty;
refine story

36. 36Copyright © 2015 Risk Management Solutions, Inc. All Rights Reserved. October 5, 2018 Source: Leveraging Catastrophe Bonds As a Mechanism for Resilient Infrastructure Project Finance – RE.bound
YOU CAN DO A LOT WITH A LITTLE