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BUS404: Risk Management

Unit 6: Risk Management: Advanced Tools   This final unit will introduce you to advanced risk management tools.  You will learn how to use data analytics, modeling, and simulation to inform risk management decisions.  You will also learn how to communicate risk to stakeholders.  Last but not least, you will learn the specific roles of risk managers and chief risk officers (CROs) in various organizations.

Unit 6 Time Advisory
This unit should take you approximately 19 hours to complete.

     Subunit 6.1: 3 hours
     Subunit 6.2: 3 hours
     Subunit 6.3: 3 hours
     Subunit 6.4: 6 hours      Subunit 6.4.1: 2 hours
     Subunit 6.4.2: 2 hours
     Subunit 6.4.3: 2 hours

     Activity: 4 hours

Unit6 Learning Outcomes
Upon successful completion of this unit, the student will be able to: - Use inputs for data analytics in risk management. - Identify appropriate modeling and simulation tools for risk management.

6.1 Risk Modeling   - Reading: McKinsey & Company’s Working Papers on Risk, Number 13: Angius et al.’s “Risk Modeling in a New Paradigm: Developing New Insight and Foresight on Structural Risk” Link: McKinsey & Company’s Working Papers on Risk, Number 13: Angius et al.’s “Risk Modeling in a New Paradigm: Developing New Insight and Foresight on Structural Risk” (PDF) 

 Instructions: Please click on the link above, scroll down the
webpage to the article titled “Risk Modeling in a New Paradigm:
Developing New Insight and Foresight on Structural Risk,” and click
on the title to download the PDF file.  Read the PDF in its
entirety.  Make sure to take notes on this resource.  This reading
discusses the failures in risk-modeling predictions of the 2008
financial crisis as well as suggests various safeguards for
financial institutions.  You will learn about the inadequate
predictive models that deemphasize the importance of sound
judgment.  You will learn how to assign disproportionate
significance to mathematical models and the accumulation of recent
information.  
    
 Studying this reading should take approximately 3 hours to
complete.  
    
 Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above

6.2 Intersection between Talent and Risk   - Reading: NC State University: Poole College of Management: Enterprise Risk Management Initiative Faculty and Amy Claus’s “The People Side of Risk Intelligence” Link: NC State University: Poole College of Management: Enterprise Risk Management Initiative Faculty and Amy Claus’s “The People Side of Risk Intelligence” (PDF)
 
Instructions: Please click on the link above, read the introduction to this white paper, and select the link at the end of the page to “The People Side of Risk Intelligence Related Materials” to download the PDF file.  Read Part I of the article (pages 2-6) for insight into the risks of talent management.  This reading addresses perspectives of both talent managers and risk managers as well as how to combine these approaches to increase enterprise value.  
 
Studying this reading should take approximately 3 hours to complete.
 
Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

6.3 Oversight of Enterprise Risk Management   - Reading: McKinsey & Company’s Working Papers on Risk, Number 18: Brodeur et al.’s “A Board Perspective on Enterprise Risk Management” Link: McKinsey & Company’s Working Papers on Risk, Number 18: Brodeur et al.’s “A Board Perspective on Enterprise Risk Management” (PDF)
 
Instructions: Please click on the link above to view a collection of McKinsey’s latest white papers on risk management.  Scroll down to the title of the article, “A Board Perspective on Enterprise Risk Management,” and click on the title to download the PDF file.  Read this entire document (15 pages) fora comprehensive perspective on the role of the company board in risk oversight.  This reading emphasizes the use of an integrated system of risk reports to prioritize and manage risks. 
 
Studying this reading should take approximately 3 hours to complete.
 
Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

6.4 Insurance Solutions   6.4.1 Nature of Insurance   - Reading: Risk Management for Enterprises and Individuals: “Chapter 6: The Insurance Institution and Solutions:” “Section 6.2: Nature of Insurance” Link: Risk Management for Enterprises and Individuals: “Chapter 6: The Insurance Institution and Solutions:” “Section 6.2: Nature of Insurance” (HTML)
 
Instructions: Please click on the link above, and read Section 6.2 in its entirety.  Also, complete the discussion questions at the end of the reading.  This reading explains the basic principles of insurance.  Pay particular attention to studying the section on the “law of large numbers.” 
 
Reading, note-taking, and answering the discussion questions should take approximately 2 hours to complete.
 
Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

6.4.2 Ideal Requisites on Insurability   - Reading: Risk Management for Enterprises and Individuals: “Chapter 6: The Insurance Institution and Solutions:” “Section 6.3: Ideal Requisites on Insurability” Link: Risk Management for Enterprises and Individuals: “Chapter 6: The Insurance Institution and Solutions:” “Section 6.3: Ideal Requisites on Insurability” (HTML)
 
Instructions: Please click on the link above, and read Section 6.3 in its entirety for an overview of the requirements for insurability.  Also, complete the Discussion questions at the end of the reading. 
 
Reading, note-taking, and answering the Discussion questions should take approximately 2 hours to complete.
 
Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

6.4.3 Ideal Requisites on Insurability   - Reading: Risk Management for Enterprises and Individuals: “Chapter 6: The Insurance Institution and Solutions:” “Section 6.4: Types of Insurance and Insurers” Link: Risk Management for Enterprises and Individuals: “Chapter 6: The Insurance Institution and Solutions:” “Section 6.4: Types of Insurance and Insurers” (HTML)
 
Instructions: Please click on the link above, and read Section 6.4 in its entirety for an overview of types of insurance and insurers.  Also, complete the Discussion questions at the end of the section. 
 
Reading, note-taking, and answering the Discussion questions should take approximately 2 hours to complete.
 
Terms of Use: Please respect the copyright and terms of use displayed on the webpage above. 

  • Activity: Palisade’s “@Risk;” Dr. Chris Albright’s “Financial Portfolio Model” and “Oil Drilling;” “@Risk 5.x Tutorials;” and “Industry Models” Links: Palisade’s “@Risk” (HTML); Dr. Chris Albright’s “Financial Portfolio Model” (Flash) and “Oil Drilling” (Flash); “@Risk 5.x Tutorials” (HTML); and “Industry Models” (HTML)

    Instructions: In this assignment, you will be asked to perform risk analysis using the @Risk software, one of the most popular risk analysis software in the world.  @Risk was developed and marketed by Palisade.  The software will be free for the first 15 days.

    For this assignment, you will be asked to do the following:

    1. Please click on the first link above, which will take you to a free trial version of @Risk.  Click on the button “Free Trial Download” under “@Risk: Now for Microsoft Excel and Microsoft Project.”  This will take you to a page, where you can fill in your personal information.  After you complete the form, click on the “Send my software!” link, and @Risk will be sent to the email address that you provided.  Follow the installation instructions to install @Risk.  You will need Excel already installed on your computer before installing @Risk. 
 2. To learn how to use @Risk, click on the second and third links
above.  On the webpage, select the link for “Financial Portfolio
Models,” and watch the entire presentation.  Then, on the webpage,
select the link for “Oil Drilling,” and watch the entire
presentation.  For further information on how to use @Risk, you can
click on the fourth link above for “@Risk 5.x Tutorials,” which will
provide a detailed tutorial for @Risk.  Make sure that you read the
tutorial in its entirety as well as follow the instructions in the
tutorial closely.  

 3. Once you have completed studying and practicing @Risk, click
on the last link above for “Industry Models.”  Scroll down to the
section titled "Event and Operational Risks," and download the Excel
file: “Example model: EventandOperationalRisks.xls.”  Open the Excel
file, and explore the effects of different parameters on the
outcomes.  

 You should dedicate approximately 4 hours to complete this
activity.  
    
 Terms of Use: Please respect the copyright and terms of use
displayed on the webpages above.
  • Activity: Pearson Education: George E. Rejda's Principles of Risk Management and Insurance: “Chapter 3: Introduction to Risk Management:” “Web Exercise” The Saylor Foundation does not yet have materials for this portion of the course. If you are interested in contributing your content to fill this gap or aware of a resource that could be used here, please submit it here.

    Submit Materials

Subunit 6.4 Assessment   - Assessment: The Saylor Foundation's "Subunit 6.4 Assessment" Link: The Saylor Foundation's "Subunit 6.4 Assessment" (PDF) and "Subunit 6.4 Assessment Answer Key" (PDF).

 Instructions: Complete this assessment after you finish the
readings of Subunit 6.4. Write down your answers before checking
with the Answer Key.