Risk intelligence

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Risk intelligence is a concept that generally means "beyond risk management", though it has been used in different ways by different writers. The term is being used more frequently by business strategists when discussing integrative business processes related to governance, risk, and compliance.

Contents

Definitions

The first non-definitive usage of the phrase "risk intelligence" appears in the 1980s and aligns to the definition of intelligence as being information from an enemy (for example, regarding credit risk.) [1] The topic of balancing risk and innovation using information and the cognitive processes involved also appears at this time. [2] Recent usage is more aligned to intelligence as understanding and problem solving.

The US business writer David Apgar defines it as the capacity to learn about risk from experience. [3]

Deloitte Risk Advisory partner (since retired) Stephen Wagner, along with former Deloitte partner and current management consultant and risk advisor Rick Funston, defined risk intelligence as a dynamic approach to protect and create value amid uncertainty. It is an enterprise wide process integrating people, processes (systems), and tools to increase information available to decision makers for improved decision making. [4]

The UK philosopher and psychologist Dylan Evans defines it as "a special kind of intelligence for thinking about risk and uncertainty", at the core of which is the ability to estimate probabilities accurately. [5] Evans includes a risk intelligence test (RQ) in his book and on his website (below) analogous to IQ or EQ.

Computer scientist and risk researcher Jochen L. Leidner [6] distinguishes three types of risk (risk type, likelihood and impact; the latter has also been called loss if expressed in negative financial terms); risk intelligence then is the process of obtaining these three pieces of information for any risk type an entity has non-trivial exposure. Risk intelligence can be obtained manually or with computer support.

American financial executive, author, and Columbia University professor Leo Tilman defined risk intelligence as "The organizational ability to think holistically about risk and uncertainty, speak a common risk language, and effectively use forward-looking risk concepts and tools in making better decisions, alleviating threats, capitalizing on opportunities, and creating lasting value." [7] He has argued that risk intelligence is essential to survival, success, and relevance of companies and investors in the post-crisis world. In this latest book Agility: How to Navigate the Unknown and Seize Opportunity in a World of Disruption (2019, co-authored with General Charles H. Jacoby Jr.), Tilman describes risk intelligence as a cornerstone of organizational agility.

Comparison with business intelligence

As an emerging concept, risk intelligence shares characteristics with other topics such as business intelligence and competitive intelligence. As such, there are some in those camps who believe that risk intelligence is the set of processes for the transformation of risk data into meaningful and useful information for risk analysis, treatment and planning purposes.

See also

Related Research Articles

Project management is the process of supervising the work of a team to achieve all project goals within the given constraints. This information is usually described in project documentation, created at the beginning of the development process. The primary constraints are scope, time and budget. The secondary challenge is to optimize the allocation of necessary inputs and apply them to meet predefined objectives.

<span class="mw-page-title-main">Risk management</span> Identification, evaluation and control of risks

Risk management is the identification, evaluation, and prioritization of risks, followed by the minimization, monitoring, and control of the impact or probability of those risks occurring. Risks can come from various sources including uncertainty in international markets, political instability, dangers of project failures, legal liabilities, credit risk, accidents, natural causes and disasters, deliberate attack from an adversary, or events of uncertain or unpredictable root-cause.

<span class="mw-page-title-main">Uncertainty</span> Situations involving imperfect or unknown information

Uncertainty or incertitude refers to situations involving imperfect or unknown information. It applies to predictions of future events, to physical measurements that are already made, or to the unknown. Uncertainty arises in partially observable or stochastic environments, as well as due to ignorance, indolence, or both. It arises in any number of fields, including insurance, philosophy, physics, statistics, economics, finance, medicine, psychology, sociology, engineering, metrology, meteorology, ecology and information science.

<span class="mw-page-title-main">Strategic management</span> Planning for a companys responses to external issues

In the field of management, strategic management involves the formulation and implementation of the major goals and initiatives taken by an organization's managers on behalf of stakeholders, based on consideration of resources and an assessment of the internal and external environments in which the organization operates. Strategic management provides overall direction to an enterprise and involves specifying the organization's objectives, developing policies and plans to achieve those objectives, and then allocating resources to implement the plans. Academics and practicing managers have developed numerous models and frameworks to assist in strategic decision-making in the context of complex environments and competitive dynamics. Strategic management is not static in nature; the models can include a feedback loop to monitor execution and to inform the next round of planning.

Agile software development is an umbrella term for approaches to developing software that reflect the values and principles agreed upon by The Agile Alliance, a group of 17 software practitioners in 2001. As documented in their Manifesto for Agile Software Development the practitioners value:

Enterprise software, also known as enterprise application software (EAS), is computer software used to satisfy the needs of an organization rather than its individual users. Enterprise software is an integral part of a computer-based information system, handling a number of business operations, for example to enhance business and management reporting tasks, or support production operations and back office functions. Enterprise systems must process information at a relatively high speed.

Organizational intelligence (OI) is the capability of an organization to comprehend and create knowledge relevant to its purpose; in words, it is the intellectual capacity of the entire organization. With relevant organizational intelligence comes great potential value for companies and organizations to figure out where their strengths and weaknesses lie in responding to change and complexity.

IT portfolio management is the application of systematic management to the investments, projects and activities of enterprise Information Technology (IT) departments. Examples of IT portfolios would be planned initiatives, projects, and ongoing IT services. The promise of IT portfolio management is the quantification of previously informal IT efforts, enabling measurement and objective evaluation of investment scenarios.

Battlespace or battle-space is a term used to signify a military strategy which integrates multiple armed forces for the military theatre of operations, including air, information, land, sea, cyber and outer space to achieve military goals. It includes the environment, timeframe and other factors, and conditions that must be understood to successfully apply combat power, protect the force, or complete the mission. This includes enemy and friendly armed forces, infrastructure, weather, terrain, and the electromagnetic spectrum within the operational areas and areas of interest.

Strategic planning software is a category of software that covers a wide range of strategic topics, methodologies, modeling and reporting.

Governance, risk management and compliance (GRC) is the term covering an organization's approach across these three practices: governance, risk management, and compliance.

A network-centric organization is a network governance pattern which empowers knowledge workers to create and leverage information to increase competitive advantage through the collaboration of small and agile self-directed teams. It is emerging in many progressive 21st century enterprises. This implies new ways of working, with consequences for the enterprise’s infrastructure, processes, people and culture.

Computer-aided lean management, in business management, is a methodology of developing and using software-controlled, lean systems integration. Its goal is to drive innovation towards cost and cycle-time savings. It attempts to create an efficient use of capital and resources through the development and use of one integrated system model to run a business's planning, engineering, design, maintenance, and operations.

Business process management (BPM) is the discipline in which people use various methods to discover, model, analyze, measure, improve, optimize, and automate business processes. Any combination of methods used to manage a company's business processes is BPM. Processes can be structured and repeatable or unstructured and variable. Though not required, enabling technologies are often used with BPM.

In software engineering, a software development process or software development life cycle (SDLC) is a process of planning and managing software development. It typically involves dividing software development work into smaller, parallel, or sequential steps or sub-processes to improve design and/or product management. The methodology may include the pre-definition of specific deliverables and artifacts that are created and completed by a project team to develop or maintain an application.

<span class="mw-page-title-main">Risk</span> Possibility of something bad happening

In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value, often focusing on negative, undesirable consequences. Many different definitions have been proposed. One international standard definition of risk is the "effect of uncertainty on objectives".

The following outline is provided as an overview of and topical guide to project management:

<span class="mw-page-title-main">Leo Tilman</span>

Leo M. Tilman is an American financier, author, and a leading authority on strategy, risk intelligence, and finance. He is a long-time advisor to companies, governments, and investors around the world who currently serves as CEO of Tilman & Company, a global strategic advisory firm. Tilman was formerly an executive at BlackRock, Capitol Peak, and Bear Stearns and adjunct professor of finance at Columbia University.

Agile business intelligence (ABI) refers to the use of Agile software development for business intelligence (BI) projects. ABI attempts to enable the BI team, business people, or stakeholders to make business decisions more quickly.

ITIL is framework with set of practices for IT activities such as IT service management (ITSM) and IT asset management (ITAM) that focus on aligning IT services with the needs of the business.

References

  1. ↑ Dedijer, Stevan (1987). Intelligence for Economic Development: An Inquiry into the Role of the Knowledge Industry. Oxford: Berg Pub Ltd. p. 288. ISBN   978-0854965205.
  2. ↑ Fischhoff, Baruch (1984). Acceptable Risk. Cambridge: Cambridge University Press. p. 204. ISBN   978-0521278928.
  3. ↑ Apgar, David (2006). Risk Intelligence: Learning to Manage What We Don't Know. Boston: Harvard Business School Publishing. p. 210. ISBN   1-59139-954-8.
  4. ↑ Funston, Frederick, and Wagner, Stephen (2010). Surviving and thriving in uncertainty: creating the risk intelligent enterprise . Hoboken, New Jersey: John Wiley & Sons, Inc. p.  338. ISBN   978-0-470-24788-4.{{cite book}}: CS1 maint: multiple names: authors list (link)
  5. ↑ Evans, Dylan (2012). Risk Intelligence: How to Live with Uncertainty. New York: Free Press. p. 288. ISBN   978-1-4516-1090-1.
  6. ↑ Leidner, Jochen L. (2015). "Computer-Supported Risk Identification for the Holistic Management of Risks". p.  5. arXiv: 1510.08285 .
  7. ↑ Tilman, L.. Risk Intelligence: A Bedrock of Dynamism and Lasting Value Creation Retrieved 2015-04-01
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