5 Whys - Answer --drills down to the originating caused of a risk event by asking why an
accident occurred, why the circumstance occurred, and on and on
-then create a fishbone diagram to map it out
-used mainly for problem involving human factors
.5 Whys Advantages - Answer --can determine the root cause of a problem
-when several root causes are found, it can determine the relationship among them
-usually doesn't require statistical analysis or data collection
.5 Whys disadvantages - Answer --often stopped after the first determination rather than
ask additional questions to discover a problem's root cause
-tend to focus on only one answer to each question
-orgs sometimes don't help the investigator ask the right why questions
-an uninformed investigator can't ask the right questions
-different investigators will discover different causes for the same problem
.Acid-Test (Quick) Ratio - Answer --Acid-Test = (cash + marketable securities +
accounts receivable) / current liabilities
-more conservative than the current ratio
.assessing risks of an organization - Answer --unique qualities of org
-industry it's in
-internal/external factors
-upstream and downstream external factors (upstream: suppliers and manufacturers;
downstream: distribution channels and consumer demands)
.Assessing Risks through network analysis - Answer --can provide insight into where
attention and energy could be best focused to influence those opinions and hopefully
minimize any negatives risks to the org's reputation
-social network analysis needs a starting point, whether a single blog post, facebook
group, etc.
-to see how much of a threat an article poses to org's reputation, the risk manager will
want to analyze the article's reach, then try to pin down how much further beyond that
network the article could travel
-can use a matrix where the presence of a social relationship is noted with a 1, and lack
of relationship with a 0; or a sociogram can help risk managers understand how far a
negative sentiment can spread
-the sentiment's influence depends significantly on its posters' degree, closeness,
betweenness
-a risk manager's goal when using a social network is to reach as many end users as
possible with the minimum amount of effort
,.assessing social media risks through text mining - Answer --first step is collecting a
group of related documents (corpus) such as a selection of product reviews or social
media posts
-this corpus can then be mined for specific words or phrases a risk manager may be
interested in monitoring
-objective of the initial text mining project is to perform a sentiment analysis of those
mentions
-to successfully analyze the text, it first must be cleaned up by eliminating spaces,
punctuation, and words that provide little info and by reducing words to their stems by
removing prefixes and suffixes
-an analysis of the term frequency and the inverse document frequency of certain terms
can provide additional insights
-as more info is discovered, new corpuses can be formed to analyze TFs and IDFs in
relation to more refined target demographics or media sources
-can help risk manager decide where to focus
.assessing supply chain risks - Answer -1.correlation and covariance
2.network analysis
-single node mapped and then map its immediate connections, called alters
-networked nodes are measured for their centrality, their relative number of alters, and
the degree to which they are a part of numerous networks
-the more nodes to bring a product to market, the more opporunity for an interruption of
the supply chain
-could show a node in a chain connected to other nodes in a network, could show
competitors making org more vulnerable; also could show availability of redundant
capacity, which could make a supply chain more resilient
-network analysis considers the attributes of each actor and how each actor relates to
the others and is affected in turn
.audits - Answer --can identify both negative risks and opportunity risks
.Blockchain for Supply Chain Risk - Answer -1. Smart Contracts
-can be used to protect parties from the persistent problem of payment risk (someone
paying for something that is never delivered or someone not getting paid for something
that is delivered)
-funds can be presented for transfer and released automatically upon execution of the
contract trigger
2. Supply Chain Specific initiatives
-Dole, Kroger, Walmart use blockchain to trace all food products from the farm to the
fork
.blockchain technology - Answer --facilitates secure transactions without the need for a
third party
-protects against cyber threats
-eliminates the need to verify the accuracy of risk management data
,-lets risk managers spend more time on forward-looking functions
.Book Value - Answer --an asset's historical cost minus accumulated depreciation
-book value is generally lower than market value because depreciation decreases it
while inflation increases market value
-based on historical cost
-ex: real estate's historical cost is building's original purchase price, including value of
the land, real estate commissions, closing costs; also any capital improvements
.Building replacement cost - Answer --the cost of constructing a new building to replace
an existing building that has been damaged or destroyed
-high degree of accuracy
-some have little economic value but high replacement costs
.Buildings - Answer --buildings are categorized by type of construction and how well that
construction withstands different hazards, like fire, wind, vandalism
-also critical is how a structure is used, its occupancy
.business process management - Answer --an enterprise-wide approach that looks to
optimize business processes, making use of automatization when appropriate
-looks at an org's operations from beginning to end
-goal is to make the org more efficient and productive, which, as with RPA, involves
limiting operational risks where possible
.casual factors - Answer --the agents that directly result in one event causing another
-each casual factor is inserted into a root cause map to determine its root cause
-ex: brakes did not "catch", other car enter intersection, truck hit car
.cause and effect analysis - Answer --looks backward through a defective process and
identifies the possible reasons, direct and contributory, that caused a negative event or
problem
-impossible to solve or prevent a problem without finding the root cause
-combines brainstorming, communications, and mapping to find the caused of a
problem and the solution
.Change Analysis - Answer --an analysis that projects the effects a given system
change is likely to have on an existing system
-asks a series of what-if questions regarding a possible change in process that has yet
to occur
-it then projects the consequences for the changes and for all feasible combos of
changes to reveal risks that could arise because of the changes that went into effect
-can also apply to various combos of changes in systems
.checklists - Answer --easy to use and communicate known risks to employees with little
efforts
-don't help identify unknown risks
, .classification tree - Answer --a supervised learning technique that uses a structure
similar to a tree to segment data according to known attributes to determine the value of
a categorical target variable
-tree has nodes, arrows, and leaf nodes
-the leaf nodes on the tree indicate the values of the target variable
-helpful because they show what you're thinking graphically and also requires a
systematic, documented thought process
.cloud computing - Answer -enables orgs to store and share data through wireless
internet and networking services
.Cluster Analysis - Answer --a model that determines previously unknown groupings of
data
-used when risk managers don't know the precise nature of info
-a collection of algorithms that put data into groups or clusters according to well-defined
similarity rules
-used when a risk manager has a general problem to solve but does not know the
variables a predictive model must analyze to do so
.coefficient of variation - Answer --another way to measure the spread of results
-used to compare results from two different sets of data to learn which has more
variation
.collaboration - Answer -the act of working together to achieve a shared objective
.Components - Answer --care must be taken to describe the components of systems in
ways that are broad enough to include all the system's aspects yet sufficiently specific
to be meaningful
-ex: physical elements
.conceptual phase - Answer --phase in life of a system when the basic purpose and
preliminary design of the system are formulated
-provides an opportunity to manage or design hazards of a system, reducing the
reliance on protective equipment and special procedures to lower the chances of human
error in later phases
.Conditional value at risk - Answer --a technique to quantify the likelihood of losing a
specific dollar amount that exceeds the VaR threshold
-same benefits of VaR but has added benefit of helping to analyze the extremely large
losses that may occur, usually with very low probabilities, in the tail of a probability
distribution
-particularly important in fat-tailed distributions, for which the extremely large losses
have higher probabilities than with most other probability distributions
