Presentation on Risk Management at Research
Exchange Programme (Warwick University)
By
EVANS AKWASI GYASI (MSC), PRINCE2
PHD RESEARCHER (WMG)
Topic: “Managing complexity and risk in upstream
oil and gas Operations”
E.A.Gyasi@warwick.ac.uk
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Overview of Risk Management
Why Risk?
How to manage Risk?
Trend of Risk now
Risk
Non-Risk
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Is Risk the same as Uncertainty? BIG NO
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“Risk and uncertainty are not synonymous or
identical”
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Uncertainty is lack of ‘certainty’ of a future
outcome or one possible outcome. Things
that are completely unknown.
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Risk is the potential that a chosen action or activity
(including the choice of inaction) will lead to a loss (an
undesirable outcome)
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“Business is the volatility of unexpected outcomes,
which can represent the value of an asset, equity or
earnings” (FRM 2012)
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Risk management is key in any endeavour. It is not for
businesses alone!!
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Its origin dates back in 1970s when the
financial market experienced increased
volatility
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Oil price shocks in 1973 fuelled inflation
of economies
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On Monday October 19, 1987 the US stock
lost 23% of investment accounting to a
loss of $1 trillion
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The bond debacle of 1994 saw a global capital
loss of $1.5 trillion in the Federal Reserves of US.
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The Japanese stock-price crumbled in 1989
which saw the Nikkei index reduced had an
unprecedented financial crisis of $2.7 trillion loss
to Japan
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The cases in Asian during 1997 saw Korea,
Indonesia and Thailand suffer in the dollar
capitalization of equities.
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The September 11, 2001 attack destroyed the
world trade centre in New York City, freezing
financial market for 6 days. Amidst the human
loss, the US stock market lost $1.7trellion in
value
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J P Morgan just lost $2billion for a hedging
activity in April “JPMorgan CEO Dimon says bank
trusted its risk models ahead of $2B trading loss”
http://www.5min.com/Video/Why-the-Wall-Street-Risk-Model-Broke-517076355
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Firms are engrossed which different
kinds of risk which can be grouped
under two broad types:
 Business
Risk-business decisions and
business environment(operations)
 Financial
Risk-all other risks are
classified under this.
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Investment decisions
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Product-development decisions
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Marketing strategies
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Organizational structure
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This normally resides outside the
control of companies. They are:
 Competition
 All
the macroeconomic risks
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Risk can be a threat: uncertain events
that could result in negative effects or
impacts on objectives
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Risk can be an Opportunity: an event
that can bring a positive outcome on
objectives
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Identification
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Assessment
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Planning
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Implementation
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Communication-very vital
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Threat Responses
Avoid-cancel or stop
 Reduce-impact or
probability(assess)
 Fallback-reduce
impact only(have a
plan)
 Transfer- contract,
insurance
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Accept
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Opportunity Responses
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Exploit
Enhance-increase the
chance of it
happening
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Share
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Reject
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Risk management is a systematic process of using
techniques, applications and procedures to identify, assess,
plan and implement risk.
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Models

Probabilistic models

Forecasting models
http://www.bloomberg.com/video/94497755-how-jamie-dimon-keptjpmorgan-trouble-under-wraps.html
(JP Morgan Case)

World's wealthiest people ended last
week $3B richer even in this economic
crisis(Investment News).
“To triumph you have to think the unthinkable”
http://www.investmentnews.com/article/201206
25/FREE/120629964# [accessed 25 June 2012]
Financial Risk Management-GARP
KPMG-PRINCE2