ERM-107-12: Strategic Risk Management Practice - Ch.7: Strategic Risk Analyses

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#1

Reading Source: Textbook - Strategic Risk Management Practice

Topics Covered in this Reading:

  • Environmental scanning in a predicable world
  • Scenario planning - A simple technique in an unpredictable word
  • Adding complexity and uncertainty
  • Dealing with the unknown
  • Handling the different images of risk
  • Conclusion

ERM-107-12: Strategic Risk Management Practice - Ch.7: Strategic Risk Analyses
#2

Hi!

I’d like to discuss the four modes of viewing the environment a bit (Formal Search, Conditional Viewing, Informal Search, Undirected Viewing)

  • When would a firm use each of these modes?
  • How could this list be tested on the exam?

Also, how often should a firm do environmental scanning, and how might this fit into the larger ERM picture?

Thanks!!


#3

I also have same questions as yours. :grimacing::grimacing:
About to how could these modes can be tested, I suggest you take a look at 2013 ERM FALL core question 6c) and 6e).

If you have any idea, please share.:sweat_smile:


#4

May I ask one more question?

In the chapter, it states the steps to create influence matrix,

  • sum all the numbers across column (left-to-right) to get the total value.
  • sum all the numbers across row (top-down) to get the total value.

Is that a typo? I think column is top-down, and row is left-to-right.


#6

The textbook is correct. You sum all the numbers across the columns from left to right, and vice versa.

With the example of e-insurance, you add left-to-right each of the (top-down) columns 1, 2, 3, 4, 5, 6 (0, 2, 1, 1, 1, 1) to get a total of 6 (which is how much e-insurance impacts the other factors).

To get the number of how much e-insurance is influenced by other risk factors, you add the rows top-down.

Does that make sense?


#7

Thanks, I got your points. I think I have misunderstood the words.:grimacing:


#8

Hi, I’d like to go over the Porters 5 Forces Model for an insurance company. Specifically the bargaining power of buyers. The study manual says that the bargaining power of buyers is low, but I think it should be high because an individual can just go to the company that has the lowest price. Can someone explain to me why my logic is incorrect?


#9

I thought Porters 5 forces is to the the INDUSTRY rather than an individual BUSINESS

So if someone wants insurance/protection, there isn’t much available other than going to an insurance company.

So the buyers (individuals) are at the mercy of the insurance companies because they don’t have many other options.

Thoughts?


#10

I would agree with @Shy_Guy. Buyers of insurance don’t have a lot of substitute products (at least yet). Thus the industry is well protected, and the power of buyers (many of them, spread out so they aren’t acting as a united entity like a union) to dictate the market price is low. I remember that when I did these questions, it can be tricky to assess these types of questions. You really have to try and put on the hat of the entity you are assessing, and analyzing the situation from their perspective. Always justify your responses because sometimes these questions have multiple answers and perspectives, depending how you interpret the situation and the players involved.


#11

Agreed with both!

Anyone wanna take a stab at explaining how the other 4 forces might affect the attractiveness of the insurance industry?