Chancen & risiko-managmentment workshop apr-2012

DSIM Networking Anlass

Di 8. März 2012 18:00- ca. 20:30EMA house, Nordstrasse 1 - Zürich

““Chancen- und Risiko-Management” mit Chancen- und Risiko-Management” mit Workshop Workshop

“Chancen- und Risiko-Management Workshop” - DSIM Networking Anlass

Event-Durchführung mit freundlicher Unterstützung von THARYS

Agenda

• Begrüssung, Einführung: Risk and Opportunity ManagementBegrüssung, Einführung: Risk and Opportunity Management

ein pragmatischer Lösungs-Ansatz - Joe A. Waser, DSIM Moderator

• THARYS Workshop: Methode und SoftwareTHARYS Workshop: Methode und Software

Fallstudie – Moderation & technische Leitung: Peter E. Klauser u. Beat Weber, THARYS

• Fragen und Antworten, Erfahrungsaustausch Fragen und Antworten, Erfahrungsaustausch - J. Waser, Beat Weber, P. Klauser- J. Waser, Beat Weber, P. Klauser• Apéro Riche, NetworkingApéro Riche, Networking

Event Logistik


??Operating Performance

Uncertainty / Uncertainty / VarianceVariance

Hazard / LossHazard / Loss

Compliance& PreventionOpportunity/Opportunity/

GainGain

““ In

purs

uit

In p

ursu

it of

the

upsi

deof

the

upsi

de””

““ In

purs

uit

In p

ursu

it of

the

upsi

deof

the

upsi

de””

StrategicInitiatives


Approaches: Holistic; from macro to micro „Enterprise wide RM“

© FIMCO Intl. GmbH

Infrastructure

Strategy

Value Proposition Value Proposition

Risk Appetite /Strategy Risk Appetite /Strategy

Business Mission Objectives and Strategy

Business Mission Objectives and Strategy

People & Culture

Customers & Markets

Information& Technology

Products & Services

Management Reporting

Risk Awareness & Analysis

Transaction Assessment & Evaluation

Data Processing & Operations

Measurement, Monitoring& Control

Evaluation Performance& Value

Environment

RiskManagement Control Cycle

Reporting Framework

BusinessStructures

BusinessProcesses

(Re)

Assessm

en

t/

Valid

ati

on

Cycle

Data & Information

Systems Policies &

ProceduresLimits &Controls

Organization& People

Methodologies

Process

Bes

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ctic

e B

est P

ract

ice

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xper

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A Project-based RM approach – Overview

© FIMCO Intl. GmbH

Current

• Cash (Flows/Positions)• Investments/Debt• FX & Interest Management• Banking

▲ Group▲ Entity▲ Currency

Risk / Flows Future ?Future ?

Current

• Policies• Processes/Practices• Organisation Structure• Technology

Organization

DriversCommercial

External markets

Strategic -Investments

OptimalRisk & Opportunity

Management Framework

Operational - Other

BestPractice

Benchmarking

FutureBes

t Pra

ctic

e B

est P

ract

ice

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xper

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Forex Risk Management Hedging Matrix - CHF-base

HighHigh>10>10

MediumMedium5-105-10

LowLow0-50-5

LowLow0-(5)0-(5)

MediumMedium(5)-(10)(5)-(10)

HighHigh>(10)>(10)

HighHigh>(50)>(50)

Medium(10)-(50)

LowLow0-(10)0-(10)

LowLow0-100-10

Medium10-50

HighHigh>50>50

VOLUME amtSELECTIVEHEDGING

TOTALHEDGING

NO or AD HOCHEDGING

VOLATILITY (%)

© FIMCO Intl. GmbH

2x5%(25%)2x5%(25%)

+/-4%(22%)+/-4%(22%)

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OutflowsOutflows InflowsInflows

neg..neg..

pos.pos.

GBP

GBP

< EUR

NOKNOK

CLPCLP

DKKDKKNZDNZD

AUD

JPY

THBTHB

SEK

CNYCNY

BRLBRL

USDUSD

EUREUR

CADCAD

CNY

ZARZAR BRLBRL

XAUXAU


Fin.Market Risk Scope / Approach: Formal Review Policies Methodology Procedures Risk Controls © FIMCO Intl. GmbH

I. Business Planning / Objective Setting

Business Mission, Objectives and Strategies

Risk Appetite

Po

lici

es,

Pro

ced

ure

s&

G

uid

elin

es

Tra

nsa

ctio

n

Ass

essm

ent

& E

valu

atio

n

Dat

a C

aptu

re&

Pro

cess

ing

Bu

sin

ess/

Po

rt-

foli

o R

isk

Mo

nit

ori

ng

Per

form

ance

Eva

luat

ion

Man

agem

ent

Rep

ort

ing

Ris

kM

anag

emen

t O

rgan

isat

ion

Ris

k M

easu

rem

ent

Met

ho

do

log

y

Sys

tem

sIn

fras

tru

ctu

re

Man

agem

ent

Rep

ort

ing

F

ram

ewo

rk

Lim

itS

tru

ctu

re

II. Risk Management Control CycleII. Risk Management Control Cycle

III. Risk Management Infrastructure

Str

uct

uri

ng

& A

nal

ysis

Continuous financial RM based on Controls & Reviews

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© PWC 2001


What your company/firm wants/needs …

Your Company, your Firm needs a/o wants to:

• keep communication channels, concerning chances and risks, open and transparent• encompass all chances and risks linked with it’s business activities OR 663b; OR 728 a&b

• to accept explicitly calculated risks consciously within predefined parameters (rather than will/can avoid risk all together)

• secure sustainable success• build a/o leverage competitive advantages by controlling & managing risks & chances

Your Company, your Firm needs a/o wants to:

• keep communication channels, concerning chances and risks, open and transparent• encompass all chances and risks linked with it’s business activities OR 663b; OR 728 a&b

• to accept explicitly calculated risks consciously within predefined parameters (rather than will/can avoid risk all together)

• secure sustainable success• build a/o leverage competitive advantages by controlling & managing risks & chances


What your company/firm wants/needs …

By assessing and handling chances and risks in a controlled manner By assessing and handling chances and risks in a controlled manner

we voluntarily build and and use a a radar for the future

Recognize unplanned events, which will have substantial negative/positive impact on corporate goals

keep oversight for opportunities to recognize changes faster and act more proactive

spot weaknesses (with substantial negative impact potential) in current processes and practicesin current processes and practices

permanent permanent supportsupport for for action plansaction plans that take into account sustainable success and positive progress

via definition and implementation of measures to reduce risk via definition and implementation of measures to reduce risk and to seize chances/opportunitiesand to seize chances/opportunities = action plan= action plan


10

Action plans and resultant investments concentrate on the top risks and opportunities

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Summary presentation THARYS approach and newest capabilities

From a commonly accepted base to … a pragmatic RM supported bysupported by

Data base tool


11

From a commonly accepted base to … a pragmatic RM supported by

Data base tool

Risiko

katastrophal

500 - 1000 CHF*

kritisch

250 - 500 CHF

wesentlich

100 - 250 CHF

moderat

50 - 100 CHF

klein

25 - 50 CHF

unbedeutend

0 - 25 CHF

Bewertungszeitraum Bestehende Massnahmen3 Jahre 4 Sehr gute und effiziente Massnahmen

3 Gute MassnahmenWert = EBIT in CHF 2 Wenig effiziente Massnahmen

1 Keinerlei Massnahmen

0 - 25 CHF

Chance

* Millionen

50 - 100 CHF

klein

25 - 50 CHF

unbedeutend

2

1

1

60%

- 80

%

sich

er

80%

- 10

0%

exorbitant

500 - 1000 CHF*

sehr gross

250 - 500 CHF

gross

100 - 250 CHF

mittel

20%

- 40

%

wah

rsch

einl

ich

40%

- 60

%

bein

ahe

sich

er

2

6

5

4

3

26

113

56

38

19

Aus

wirk

ung

Wahrscheinlichkeit

38 53 68

3 4 5 6

unw

ahrs

chei

nlic

h

19 26 34

6,25 8,75 11

0% -

10%

selte

n

10%

- 20

%

mög

lich

680

340

90 120 160

190 260

230

50

380 530

110

3,75

23

11

11

5,63

1,88

3,75

1,88

0,63

8,75

Ab- und Versichern

Akzeptieren

oder „wenig tun“

Priorität auf operativen Massnahmen

Risk Response Strategies

Risk ReductionRisk Avoidance

Risk Transfer Risk Acceptance

Risk Assessment >>> Risk Response

Which are the most reasonable/effective measures to reduce risk? Cost/benefit evaluations

- Individually for each risk - Taking into account risk acceptability/tolerance

Reading the charts in a generic tactical manner – driving action plans

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Post scriptum

• “ ”“ ”Over time, the Over time, the controversycontroversy between quantification based on observations of the past and subjective degrees of belief has taken on a between quantification based on observations of the past and subjective degrees of belief has taken on a deeper significance. The mathematically driven apparatus of modern risk management contains the seed of a dehumaning and self-deeper significance. The mathematically driven apparatus of modern risk management contains the seed of a dehumaning and self-destructing technology. destructing technology.

• Nobel Laureate Kenneth Arrow warned “our knowledge of the way things work, in society or in nature, comes trailing clouds of vagueness. Nobel Laureate Kenneth Arrow warned “our knowledge of the way things work, in society or in nature, comes trailing clouds of vagueness. Vast ills have followed a belief in certaintyVast ills have followed a belief in certainty””

• In the process of breaking free from the past we may have become slaves of a new religion, a creed that is just as implacable, confining In the process of breaking free from the past we may have become slaves of a new religion, a creed that is just as implacable, confining and arbitrary as the old.and arbitrary as the old.

• Our lives teem with numbers, but Our lives teem with numbers, but we sometimes forget that numbers are only toolswe sometimes forget that numbers are only tools. They have no souls: they may indeed become . They have no souls: they may indeed become fetishesfetishes. . Many of our most critical decisionsMany of our most critical decisions are made by computersare made by computers, contraptions , contraptions (devices) that devour numbers like voracious (devices) that devour numbers like voracious monsters and insist on being nourished with ever-greater quantities of digits to crunch, digest ,and spew backmonsters and insist on being nourished with ever-greater quantities of digits to crunch, digest ,and spew back

• To judge the extent to which today’s methods of dealing with risk are either a benefit or a threat, we must know the whole To judge the extent to which today’s methods of dealing with risk are either a benefit or a threat, we must know the whole story, from it very beginnings - we must know why people of past times did (or did not) tame risk - how they approached story, from it very beginnings - we must know why people of past times did (or did not) tame risk - how they approached the task - what modes of thinking and language emerged from their experience – and how their activities interacted with the task - what modes of thinking and language emerged from their experience – and how their activities interacted with other events (large and small), to change the course of culture.other events (large and small), to change the course of culture.

• Such a perspective will bring us to Such a perspective will bring us to a deeper understanding of where we stand, and where we are headinga deeper understanding of where we stand, and where we are heading. . “pg 7” “pg 7”

• The word “risk” derives from The word “risk” derives from risicare risicare which means “to dare”. In this sense, risk is a choice rather than a fate. The actions we dare to take, which means “to dare”. In this sense, risk is a choice rather than a fate. The actions we dare to take, which dependwhich depend on how free we are to make choices, are what the story of risk is all about. And the story means to define what it means to on how free we are to make choices, are what the story of risk is all about. And the story means to define what it means to be a human being. “pg 7”be a human being. “pg 7”


The remarkable Story of Risk AGAINST THE GODS Peter L. BERNSTEIN ©1996

• PLB argues PLB argues the notion of bringing risk under control is one of the central ideas that distinguishes modern times form the more distant past …. from remarkable intellectual adventures that liberated humanity …. from remarkable intellectual adventures that liberated humanity [from the murky domain of oracles and soothsayers] [from the murky domain of oracles and soothsayers] by means of the powerful tools of risk management are available today.

• … … richly woven tale of Greek philosophers and Arab mathematician, of merchants and scientists, richly woven tale of Greek philosophers and Arab mathematician, of merchants and scientists, gamblers and philosophers, world-known intellects and obscure but inspired amateurs who helped gamblers and philosophers, world-known intellects and obscure but inspired amateurs who helped discover the modern methods of putting the future at the service of the present, replacing discover the modern methods of putting the future at the service of the present, replacing helplessness…helplessness…

• When entrepreneurs launch new businesses, investors buy stocks, When entrepreneurs launch new businesses, investors buy stocks, surgeons perform operations, engineers design bridges, astronauts surgeons perform operations, engineers design bridges, astronauts explore the heavens, and politicians run for office - risk is their explore the heavens, and politicians run for office - risk is their inescapable partner - - Yet their actions reveal that inescapable partner - - Yet their actions reveal that risk today need not be feared managing risk has become synonymous with challenge and opportunity


History

Th

e m

od

ern

con

cep

tion

of

risk is

roote

d in

the H

ind

u-A

rab

ic

nu

mb

eri

ng

syste

m t

hat

reach

ed

th

e

West

seven

to e

igh

t h

un

dre

d y

ears

ag

o.

In In 1875, Francis Galton1875, Francis Galton ((amateur mathematician; Charles Darwin’s first Cousin) amateur mathematician; Charles Darwin’s first Cousin)

discovered discovered regression to the meanregression to the mean – – Whenever we make any decision Whenever we make any decision

based on the expectation that based on the expectation that matters will return to “normal” matters will return to “normal” we are employing the notion we are employing the notion

of regression to the meanof regression to the mean

But the But the serious study of risk began serious study of risk began during the Renaissance, when people , when people broke loose from the constraints of the past broke loose from the constraints of the past and subjected long-held beliefs to open challenge.and subjected long-held beliefs to open challenge.

~~1700 Jacob Bernoulli1700 Jacob Bernoulli (Swiss scientist and mathematician) (Swiss scientist and mathematician) developed developed The Law of Large NumbersThe Law of Large Numbers

17301730, Abraham , Abraham de Moivrede Moivre suggested the suggested the structure of normal distributionstructure of normal distribution– – also known as also known as the bell curvethe bell curve--

All the tools we use today in risk management and in the analysis of decisions and choice

- from the strict rationality of game theory to the challenges of chaos theory -

stem from the developments that took place between 1654 and 1760

- with only two exceptions

In In 19521952, Nobel Laureate , Nobel Laureate Harry MarkowitzHarry Markowitz, ,

demonstrated mathematically demonstrated mathematically why why putting all eggs in one basketputting all eggs in one basketis an unacceptable risky strategyis an unacceptable risky strategy

and whyand why diversificationdiversification is the nearest is the nearest a manager/investor a manager/investor

ever can come ever can come to a free lunch.to a free lunch.

By By 1654 1654 (when the (when the RenaissanceRenaissance was in full flower) was in full flower) Chevalier de Méré challenged famedChevalier de Méré challenged famed French Mathematician French Mathematician Blaise PascalBlaise Pascal …”how to divide the stakes of an unfinished game of chance between 2 players when one of them is ahead”. Collaboration with Pierre de Fermat was intellectual dynamite Collaboration with Pierre de Fermat was intellectual dynamite and led to and led to the discovery of the theory of probabilitythe discovery of the theory of probability – – the mathematical heart of the concept of riskthe mathematical heart of the concept of risk..

8 years later Daniel Bernoulli (nephew of Jacob) first defined the 8 years later Daniel Bernoulli (nephew of Jacob) first defined the systematic process by which most people make choicessystematic process by which most people make choices (even more important, he (even more important, he propounded the idea that the satisfaction resulting from any small increase in wealthpropounded the idea that the satisfaction resulting from any small increase in wealth “ “will be inversely proportionate to the quantity of good previously possessed” will be inversely proportionate to the quantity of good previously possessed” ……statement statement stood as thestood as the dominant paradigm of rational behaviour for the next 250 years dominant paradigm of rational behaviour for the next 250 years

~1750~1750 English minister English minister Thomas BayesThomas Bayes made a striking advance in statistics by made a striking advance in statistics by demonstrating how to make demonstrating how to make better-informed decisions by mathematically blending better-informed decisions by mathematically blending new information into oldnew information into old - His - His theoremtheorem focuses on the frequent occasions when we focuses on the frequent occasions when we have sound intuitive judgement about the probability of some event and want to have sound intuitive judgement about the probability of some event and want to understand how to alter those judgmentsunderstand how to alter those judgments as actual events unfold as actual events unfold


Post scriptum