1. MULTI DIMENSION IMPACT ACCOUNTING File:
MDIA-p3-14-RISK-150725.odp Peter Burgess (c) All rights reserved
MDIA RISK SOME BETTER WAYS TO LOOK AT RISK
2. MULTI DIMENSION IMPACT ACCOUNTING WORK-IN-PROGRESS. SLIDESET
STILL IN DEVELOPMENT. UPDATES WILL BE POSTED OVER THE NEXT SEVERAL
WEEKS
3. THE MDIA SLIDESET SERIES This slideset is part of a series
being prepared to describe the concepts of TrueValueMetrics and
being used to develop better metrics for the complex
Socio-Enviro-Economic-System that now exists in the 21st century
This link enables easy navigation to the other slidesets in the
series:
http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=list0200-Burgess-p3-Slidesets
MULTI DIMENSION IMPACT ACCOUNTING
4. RISK The idea that you can measure and therefore manage risk
based simply on this formula is completely invalid: Cost of the
Likelihood of the risk event risk event happening MULTI DIMENSION
IMPACT ACCOUNTING XRisk =
5. rather multiple issues must be considered separately and
together If the event happens what will be the cost? How frequently
will the event happen? What will it cost to reduce the frequency?
What will it cost to reduce the cost or the risk event when it
happens? MULTI DIMENSION IMPACT ACCOUNTING
6. Somehow funds have to be available to meet the costs when
there is a risk event. MULTI DIMENSION IMPACT ACCOUNTING
7. It may be valid to calculate the net present value (NPV) of
a future flow of profits using a method that 'discounts' the future
MULTI DIMENSION IMPACT ACCOUNTING
8. It is, however, absolutely wrong to use a similar
discounting computation to cost and plan for most future risk
events. MULTI DIMENSION IMPACT ACCOUNTING
9. Risk analysis MUST reflect the full cost of a future risk
event AND risk management must include plans for all of this cost
to be funded. MULTI DIMENSION IMPACT ACCOUNTING
10. Unfunded risk is a serious problem rather similar to the
problem of unfunded pensions in corporate business and government
finance, but potentially very much larger. MULTI DIMENSION IMPACT
ACCOUNTING
11. Risks may be: man made; natural; or social. MULTI DIMENSION
IMPACT ACCOUNTING
12. Risks may be: Geopolitical; Environmental; Societal;
Technological; or Economic. MULTI DIMENSION IMPACT ACCOUNTING From
World Economic Forum 2015
13. Geopolitical Risks include: Interstate risks; State
collapse or crisis; Failure of national governance; Terrorists
attacks; and Weapons of Mass Destruction. MULTI DIMENSION IMPACT
ACCOUNTING
14. Environmental Risks include: Extreme weather events;
Failure of climate change adaptation; Natural catastrophes;
Biodiversity loss and ecosystem collapse; Man-made environmental
catastrophe. MULTI DIMENSION IMPACT ACCOUNTING
15. Societal Risks include: Water crises; Profound social
instability; Spread of infectious diseases; Food crisis; Large
scale involuntary migration; Failure of urban planning. MULTI
DIMENSION IMPACT ACCOUNTING
16. Technological Risks include: Cyber attacks; Data fraud and
theft; Misuse of technology; Critical information infrastructure
breakdown. MULTI DIMENSION IMPACT ACCOUNTING
17. The WEF risk report in January 2015 did not explicitly
reference the risk posed by the systemic dysfunction of the modern
global socio-enviro-economic system and the way the dominant
metrics of this system only deliver reward to owners of financial
wealth and exploit everything to do with human capital and natural
capital. MULTI DIMENSION IMPACT ACCOUNTING
18. There is no reference to SYSTEMIC RISK, GREED AND
STUPIDITY. MULTI DIMENSION IMPACT ACCOUNTING
19. The lack of MONEY should not be a constraint on REDUCING
RISK the real constraint is the lack of KNOWLEDGE and the lack of
SYSTEMIC SOLUTIONS for dangerous system dysfunction. MULTI
DIMENSION IMPACT ACCOUNTING
20. BETTER METRICS is a step towards BETTER DECISIONS that can
reduce RISK and result in BETTER OUTCOMES. MULTI DIMENSION IMPACT
ACCOUNTING
21. BETTER METRICS will be as rigorous about IMPACT on SOCIETY
(PEOPLE) and the ENVIRONMENT (PLANET) as conventional money
accounting and economic measures like GDP are for COMPANY
PERFORMANCE (PROFIT). MULTI DIMENSION IMPACT ACCOUNTING
22. Follow up: Request for Feedback Getting these ideas fleshed
out into a clear, simple but comprehensive structure is a big job
and remains a work-in- progress. Many organizations are making
progress with this, but there is no broad universal framework yet
that will enable all the pieces to come together and work
efficiently. I would like to get feedback from anyone and everyone
to help move this initiative forward. While I have some clear
concepts about much of this architecture, there are many details
that I do not know enough about and need help. So, please feel free
to contact me ([email protected]). Please put something relevant
and catchy in the subject line. MULTI DIMENSION IMPACT
ACCOUNTING
23. Some links and contact information: Peter Burgess
[email protected] Peter Burgess LinkedIn profile
https://www.linkedin.com/in/peterburgess1 Link to
TrueValueMetrics.org website http://www.truevaluemetrics.org/ Link
to navigation for MDIA slidesets
http://www.truevaluemetrics.org/DBadmin/DBtxt001.php?vv1=list0200-Burgess-p3-Slidesets
MULTI DIMENSION IMPACT ACCOUNTING