Risk Analysis

Drivers of Key Risks

Risk is the probable damage, which may happen for any ongoing process or some future event.

Financial Risks Strategic Risks

Interest Rates Competition
FOREX Customer Changes
Credit Industry Changes
ly Customer Demand
x ter na l
E en Some risks can
Driv
have both external
and internal drivers.
M & A Integration Hence, those risks
Liquidity & Cash Flow R&D overlap in two
Intellectual Capital areas.
Internally Driven
Accounting Controls
Information System
To combat these
Products & Services
risks, Risk
Recruitment
Management has
Supply Chain Public Access
Ex t become a core
ern Employees business process.
Driv ally
en Properties
Contracts
Regulations Natural Events
Culture
Supplies
Board Composition Environment

Operational Risks Hazard Risks

 Risk Management Process
The Organization's Strategic Objectives

Risk Assessment

Risk Analysis Risk Description

Risk Identification Risk Estimation

Data Business
Risk
Analysis Research
Evaluation
Risk Reporting
Threats and Opportunities

Decision

Risk Treatment

Residual Risk Reporting

Monitoring
 Risk Analysis Methods and Techniques
Pricing Optimization

Scenario Analysis Profitability and

Productivity Analysis

HAZOP
Data
Cluster Analysis
(Hazard & operability Studies)
Analysis

Asset Management FMEA

(Failure Mode & Effect Analysis)

Fault Tree Analysis

 Risk Analysis Methods and Techniques
Market Survey

SWOT
Primary
(Strengths Weaknesses
Research
Opportunities Threat)

PESTLE
(Political Economical Social
Business Secondary
Research
Technical Legal Environmental)
Research

Business Impact
Modeling
Analysis

Incident Investigation
 Risk Management in New
Product Development
Why research and
analysis before new
product development
New product have a very high failure rates.
Products fail, not because of technical
shortcomings, but due to absence of market.
Over 60% of new product fail before entering
the market, and out of the remaining 40% that
do see the ray of light, 40% fail to yield profit
and are withdrawn from the market.
Timely and reliable knowledge about
customer preferences is most important. Such
data is obtained from business research.
New product development is linked with
very limited historical or preliminary data.
Hence, risky
Risk can be in form of market, technical, or
organizational issues. Risk analysis solves
the problem through flexible modeling,
primary and secondary research.
A good strategy is a must for evaluating
and dealing with the associated and
unavoidable risks.
Research conducted to understand
customer needs and develop a new product
is different from research required to launch
a new product.
Product development research is focused
on needs of customers while launch
research focuses on understanding the
motivation and attitudes of early adopters.
Successful targeting of early adopters
builds the fountain for new product success.
 Risk Management pertaining to
the Business Environment Environment

Constituents of the Business Environment

External Internal

Socio-
Regulations Technology Competition Structure Processes Culture
Economic

• Companies operate in a dynamic business environment which forces them to adopt risk management measures.
• The business environment is both external and internal to a company and an adverse change in any of the above
mentioned constituents can increase the risk levels for the company.
 Scenario Analysis at Shell
• Shell makes use of a strategic planning process in which a series of
“what if “ scenarios are created
Strategy • The management at all levels is made to think strategically about the
company’s business environment

Shell’s scenario analysis

Identify trends and their drivers Testimonial

Develop the what, why and how of different scenarios
Identify parameters to monitor the environment
Develop contingent strategies to tackle each scenario
In early 1986, the price of oil fell to USD
10 per barrel and Shell’s scenario
analysis proved successful as it was in a
better position than its competitors to
face the situation

• Shell has deployed processes and systems to anticipate future scenarios by analyzing the interplay of
environmental factors and its impact on Shell’s business
• Scenario analysis presents complex interactions of future in a simplified, easy to understandable form
• By picking the more probable scenarios, the company can brace or prepare itself for exploiting future
opportunities and challenges
• It helps the company in formulating strategy and decide the trade-offs required
 Poor Data Quality - Concerns
• One third of the data in the enterprise level databases are corrupted within a year
• Over time wastage of resources and money on the CRM initiatives exceeds the initial
investment
• CRM spending has been increasing annually by 15%, but nearly half of all CRM
initiatives have been unsuccessful
• Every 100 Euro spent in marketing/CRM initiatives is worth only 66 to start with when
working with poor quality data

30000
28470

25000 23977
Cumulative

20000
19202

15000
14127

10000 8733

5000 3000

Jan Mar May Jul Sep Nov

Data Decay - Typical CRM Database* CRM Initiatives – Spending**

 Poor Data Quality – Causes and Impacts
Causes
• Careless data entry
• Changes to source systems
• Data migration/conversion projects Data Corruption is
• External data
• System Errors
Unavoidable
• Data entry by customers

Efficient Solution – Data Cleansing

Impacts
Impacts your ROI • Time wasted in reconciling data
• Loss of System Credibility
• Duplicate mailings
• Customer Dissatisfaction
• Delay in deploying new systems
 Inefficiency in Customer Relationship
Management Initiatives – Example
Challenges Causes Fallouts
Change in location  Sending promotional offers through
 Updating or change in contact mails to incorrect addresses of
addresses and telephone customers and prospects. (58%
Lack of routine numbers wrong mailings)
updating of
existing database Job related changes  Mail either reaches the wrong
 Change in designation person or organization
e.g. change in
 Switching of jobs or  The customer might receive the
communication
departments mail with an incorrect designation
address
 Change in the name of the attached to his name
Organisation  Targeting the wrong groups

Social changes
 Mail might not reach the probable
 Change in titles, names or
customer
surnames
 The customer might be addressed
 Change in social status
wrongly

The fallouts might lead to maintenance of huge, unwieldy databases, decrease in sales,
profits and customers. Companies reputation might also be at stake.