Risk and Contingency

Planning

• Richard Farr

Contents

What is risk?

A ‘risk simulator’ you probably already own: Monopoly

Objectives(Just in case you’ve been on Mars since 1933...)

An expert explains...

Risk scenario...you are here what happens if you roll 6, 8 or 9?

The risk scenario

Dice rolls and probability

Probability distribution

Probability...

Reducing risk

Decisiontree...Mean cost of the ‘risk' strategy: £298.38Known cost of the ‘insurance' strategy: £330

The “meta-game”

Coping with risk:

The cost of jet fuel...

Options defined

Strategic risk:

Two views of the future

Losing their nerve?

Losing their nerve?

With the A350 and 747-8...

Coping with risk

Risk prioritisation

Problem Severity Likelihood Prioritised

Robbery 3 2 6

Building fire 5 1 5

Trip hazards 1 4 4

Corporate approaches

One last example

One last example

My blog: http://capacify.wordpress.comOn Twitter: @Capacified - Richard Farr

Tutor notesS.6: If your students think being a Monopoly champion sounds terribly nerdy, inform

them that the Monopoly final is played with real money, and the winner gets to keep it all.

S.10: You may not need this one, depending upon the background of your trainees.

S.15-20: Remember that airlines are very cash-positive businesses – passengers pay

long in advance, so hedging ought to be affordable. The hedging issue cost Ryanair

£92m; locking in fuel prices of $124 a barrel for 80% the airline’s fuel during the third

quarter, when the price of oil collapsed to a low of $33 a barrel.

S.26: Engineers use a three-stage risk prioritisation approach, adding a scale for the

probability of the hazard being detected.

S.28: Charles Darrow didn’t invent Monopoly; Elizabeth Magie created it in 1903, and it

was commercially published as early as 1923, as ‘The Landlords Game’. Charles Darrow

merely drew the board illustrations - some of which still appear in the modern game.