In every decision context there are things we know and things we do not know. Risk analysis uses science and the best available evidence to assess what we know—and it is intentional in the way it addresses the importance of the things we don’t know. Principles of Risk Analysis: Decision Making Under Uncertainty lays out the tasks of risk analysis in a straightforward, conceptual manner that is consistent with the risk models of all communities of practice. It answers the questions "what is risk analysis?" and "how do I do this?"
Distilling the common principles of the many risk tribes and dialects into serviceable definitions and narratives, the book provides a foundation for the practice of risk analysis and decision making under uncertainty for professionals from all walks of life. In the first part of the book, readers learn the language, models, and concepts of risk analysis and its three component tasks—risk management, assessment, and communication. The second part of the book supplies the tools, techniques, and methodologies to help readers apply the principles. From problem identification and brainstorming to model building and choosing a probability distribution, the author walks readers through the how-to of risk assessment. Addressing the critical task of risk communication, he explains how to present the results of assessments and how to develop effective messages.
The book’s simple and straightforward style—based on the author’s decades of experience as a risk analyst, trainer, and educator—strips away the mysterious aura that often accompanies risk analysis. It describes the principles in a manner that empowers readers to begin the practice of risk analysis, to better understand and use the models and practice of their individual fields, and to gain access to the rich and sophisticated professional literature on risk analysis.
Additional exercises as well as a free student version of the Palisade Corporation DecisionTools® Suite software and files used in the preparation of this book are available for download.
What is Risk?
What Is Risk Analysis?
Why Do Risk Analysis?
Who Does Risk Analysis?
When Should We Do Risk Analysis?
Organization of Book
Uncertainty from 75,000 Feet
The Uncertainty on Your Desk
Being Intentional About Uncertainty
Identifying Problems and Opportunities
Risk Management Models
What Makes a Good Risk Assessment?
Risk Assessment Activities
Risk Assessment Models
Risk Assessment Methods
Internal Risk Communication
External Risk Communication
Problem Identification for Risk Management
What’s a Problem? What’s an Opportunity?
Becoming Aware of Problems and Opportunities
Problem and Opportunity Identification Techniques
The P&O Statement
What Can You Brainstorm?
Avoid Problems in Your Process
A Few Good Techniques
Group Evaluations with Colored Dots
Do You Need a Facilitator?
Opportunity Costs and Trade-Offs
Economics for Risk Managers
Economics and Decision Making
Economic Basis for Interactions among People
Principles of the Economy as a Whole
Qualitative Risk Assessment
Risk = Probability × Consequence
A Generic Process
More or Less Risk
The Risk Matrix
Qualitative Risk Assessment Models
A Semiquantitative Risk Assessment Example
The Art and Practice of Risk Assessment Modeling
Types of Models
A Model-Building Process
Required Skill Sets
Two Schools of Thought
How Do We Get Probabilities?
Working with Probabilities
Why You Need to Know This
Choosing a Probability Distribution
Strategy for Selecting a Probability Distribution
A Dozen Useful Probability Distributions for Risk Assessors
When to Do an Elicitation
Making Judgments under Uncertainty
Responding to Heuristics
The Elicitation Protocol
Monte Carlo Process
A Two-Step Process
How Many Iterations?
Probabilistic Scenario Analysis
Types of Scenario Analysis
Tools for Constructing Scenarios
Adding Probability to the Scenarios
Qualitative Sensitivity Analysis
Quantitative Sensitivity Analysis
Presenting and Using Assessment Results
Understand Your Assessment Output Data Before You Explain It
Examine the Quantities
Examine the Probabilities
Answer the Questions
Visualization of Data
Decision Making under Uncertainty
The Need for Message Strategies for Risk Communication
Impediments to Risk Communication
Developing Risk Communication Messages
Appendix A: The Language of Risk and ISO 31000
Enterprise Risk Management
Appendix B: Using Palisade’s Decision Tools Suite
All chapters include an introduction, summary, and references.
|Cross Platform||May 24, 2012||Tools||Appendix B provides an introduction to Palisade Corporation’s DecisionTools® Suite software that was used in the preparation of this book. Files used in the creation of this book and additional exercises as well as a free student version of the software are available at http://www.palisade.com/bookdownloads/yoe/principles/|