Enterprise Risk Management

  • 1.  Residual Risk and Opportunity

    Posted 01-23-2009 10:30 AM
    This message has been cross posted to the following egroups: Financial Services and Enterprise Risk Management.
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    When an opportunity has been identified along with the exploiting methods, what would be the residual risk component of an opportunity?

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    Manminder Jagait
    Risk Manager Consultant
    Canada
    mjagait@ocwa.com
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  • 2.  RE:Residual Risk and Opportunity

    Posted 01-27-2009 01:11 PM
    The approach we use is roughly as follows:

    Residual risk = Gross risk / Risk controls.

    Gross risk = (importance * urgency) * (likelihood * impact)

    The scaling for each element above, including Risk controls, is a simple numerical range between 1 (low risk) and 3 (high risk). Definitions attribuatable to each element are specified as part of an overall ERM program document. Assignment of risk "levels" is either by subjective agreement among experts or the result of stochastic outputs.

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    Ken Dolan
    Asst. Treasurer - ERM
    MDU Resources Group, Inc.
    Bismarck ND
    United States
    ken.dolan@mduresources.com
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