Risk management services
Too often we have seen companies and government agencies using mathematically illogical risk matrices and overly detailed risk registers resulting in a lot of work for little benefit. It may tick a box, but it's benefits to managing risk are often minimal.
In contrast, Kelly & Yang's approach to risk management is consistent with ISO31000 and entails:
Risk analysis with look-ahead prediction based on the knowledge of subject matter experts and industry experience already resident within the client’s management team such as where risks can be expected to occur once in five years, ten years, 50 years etc. These are then easily translated into mathematical likelihood percentages.
Estimated dollar impact of each risk.
Cross-referenced to insurance coverage and assurance processes.
While most risks come from an expected cause, the risk management process should also account for the unexpected "black swan" which might be a one-in-a-hundred-year event, so a 1% chance of occurrence in any one year.
From that it is mathematically straightforward to get probability percentages and likely cost ranges from which risks can be summarized into the top ten and Monte Carlo'ed into a dollar distribution net of insurance recoveries.
Against this distribution of risk, we help management to match the company's financial strength in terms of cash management, borrowings headroom and earnings ability to ascertain how well risk is covered by company resources.
Kelly & Yang's approach to risk has many benefits:
Risks can be linked to insurance coverage. Cover limits and deductibles can then be optimized if they don't fit the board's risk appetite.
Productive debate at board/audit committee as to the nature of risks, their quantification estimates and the board's overall risk appetite.
Easily derive a one-page summary of, say, the most impactful 10 or 20 risks.
Business procedures found to need modification can be updated to reduce risks, often at little or no marginal cost, with reductions in risk automatically quantified in the Monte Carlo distribution.
Risks can be linked to the internal audit program and other assurance processes (eg safety) to ensure alignment of assurance activities within the context of the business's risk priorities.
Risk management outsourcing
Risk reporting to board level
Monte Carlo simulation
Facilitated risk workshops