The mantra of modern management in risk reduction, risk reduction, risk reduction... but what is risk, and how can managers make informed decisions about the hazards they (might) face? This presentation introduces students to some fundamental concepts, and methodologies, making reference to a boardgame that virtually everybody knows.

1. Risk and
Contingency
Planning
• Richard Farr

2. Contents

3. What is risk?

4. A ‘risk simulator’ you probably already own:
Monopoly

5. Objectives
(Just in case you’ve been on Mars since 1933...)

6. An expert explains...

7. Risk scenario...
you are here what happens if you
roll 6, 8 or 9?

8. The risk scenario

9. Dice rolls and probability

10. Probability distribution

11. Probability...

12. Reducing risk

13. Decision
tree...
Mean cost of the
‘risk' strategy:
£298.38
Known cost of the
‘insurance' strategy:
£330

14. The “meta-game”

15. Coping with risk:
The cost of jet fuel...

20. Options defined

21. Strategic risk:
Two views of the future

22. Losing their nerve?

23. Losing their nerve?

24. With the A350 and 747-8...

25. Coping with risk

26. Risk prioritisation
Problem Severity Likelihood Prioritised
Robbery 3 2 6
Building fire 5 1 5
Trip hazards 1 4 4

27. Corporate approaches

28. One last example

29. One last example

30. My blog: http://capacify.wordpress.com
On Twitter: @Capacified - Richard Farr

31. Tutor notes
S.6: If your students think being a Monopoly champion sounds terribly nerdy, inform
them that the Monopoly final is played with real money, and the winner gets to keep it all.
S.10: You may not need this one, depending upon the background of your trainees.
S.15-20: Remember that airlines are very cash-positive businesses – passengers pay
long in advance, so hedging ought to be affordable. The hedging issue cost Ryanair
£92m; locking in fuel prices of $124 a barrel for 80% the airline’s fuel during the third
quarter, when the price of oil collapsed to a low of $33 a barrel.
S.26: Engineers use a three-stage risk prioritisation approach, adding a scale for the
probability of the hazard being detected.
S.28: Charles Darrow didn’t invent Monopoly; Elizabeth Magie created it in 1903, and it
was commercially published as early as 1923, as ‘The Landlords Game’. Charles Darrow
merely drew the board illustrations - some of which still appear in the modern game.