Using Riskope’s Economic Downturn Magnitude and Duration Forecast to Manage your Future Rational and sustainable risk management requires quantitative understanding of scenarios

1. Using Riskope’s Economic Downturn Magnitude and Duration Forecast to Manage your Future (Based on Nov. 2008 Forecast by Riskope) Franco & Cesar Oboni Riskope International Rational and sustainable risk management requires quantitative understanding of scenarios

2. Because we know this is manageable we made it our mission to build the most effective approach. 25 minutes Months if not Years...

3. Our Lives, Corporations, Projects Can be seen as a never ending succession of cycles of growth, peace, turmoil, i.e. cycles of great changes we call crises. Fast growth can be seen as a positive crisis: in some cases it can, however, suddenly turn into a negative crisis. A crisis is a decisive moment, particularly in times of danger or difficulty.

4. Generic Phased Crisis Model Triggering point for the emergency plan Controlled crisis Uncontrolled crisis…may evolve to catastrophic consequences One crisis cycle (time) Event Intensity : from emergency to crisis Emergency that does not evolve into a crisis Phase 1 Potential Phase 2 Latent Phase 3 Acute Phase 4 Return Phase 1 Potential Desired Level of Service Tolerated level of disservice (minor emergency) Max tolerated disservice limit (max emergency) Crisis Catastrophic crisis

8. The future lies in using Risk to weigh decisions, rather than just guiding mitigation.

9. Scenarios can be prioritized by their intolerable part of risk. A clear road-map becomes available for rational and sustainable RM/ERM.

10. * A mathematical model is used Bar graph for the Intolerable portion of the scenarios Of the 14 initial scenarios, seven are above tolerability, but only three are top attention priority.

11. Case Study Several mid-sized companies face the present economic downturn

14. Measure of the Depth of Recession: “loss of service and control” in the country system, for which we can build a scale as follows, by drawing examples from the past: Level 1:Persistance , or Status Quo, i.e. generalized budget cuts in the non- key services, for example starting with culture, arts, then going to education [1] ; some protests [2] . [1] cuts are already being performed in various countries, France, Italy etc. [2] also in act, Russia, Japan, etc

17. Level 4:Critical evolution of disservice (Disruption of Order and Quality of Life), generalized rioting, wide spread criminality and sacking, and total loss of control.

18. Apparently some countries in the G20 group have already passed the Status Quo level, but as we are developing this study for a “theoretical” country within the group, we will not bother with these particular cases here.

19. Crisis Forecast, November 2008

22. P C 5 M/years 0.20 0.25 0.55 Tolerable Intolerable Persistent Significant Worsening Critical Evolution 7 M/years 2 M/years Risk: 0.4 Risk: 1.25 Risk: 3.85 Intolerable: 0.07 Intolerable: 0 Intolerable: 1.53 Sometimes a risk assessment confirms intuitive “feelings”!

25. P C 3 M/years 0.20 0.25 0.55 Tolerable Intolerable Persistent Significant Worsening Critical Evolution 6 M/years 1 M/years Intolerable: 0.16 Risk: 0.75 Risk: 0.55 Intolerable: 0 Intolerable: 0 Risk: 1.2 Status quo may mean, quite surprisingly, highest priority!

28. P C 4 M/years 0.20 0.25 0.55 Tolerable Intolerable Persistent Significant Worsening Critical Evolution 6 M/years 3 M/years Intolerable: 0 Risk: 1.5 Intolerable: 0.01 Risk: 1.65 Risk: 0.8 Intolerable: 0.24 Highest risk does not necessarily mean highest priority!

30. Scenarios will be prioritized by their intolerable part of risk. Therefore a clear road-map becomes available. Transparent decision can be taken leading to a rational and sustainable RM/ERM.

31. Details available upon request via contact page at http://www.riskope.com These results can help building rational risk management strategies. Contact us, Franco & Cesar Oboni Riskope International