10 risk tools to use

before you die

Prof. Hernan Huwyler, MBA CPA
IE, top global MBA
 New IE Tower
IE, top worldwide MBAs
Sep 2021
1 Monte Carlo Simulation
Simulations of 10,000 scenarios with
multiple random variables to show the
distribution of all possible outputs

Calculate reserves for non-compliance

Estimate potential profits in a future contract
Estimate default provisions
2 Decision Tree
Flowchart of outcomes of decision
alternatives and chances to show their
expected monetary values

Set the strategy in legal cases

Decide how much to invest in corporate defense
Select the best investment alternative
3 Risk Return Spectrum
Comparison of expected profits
against costs and liabilities in
investment projects

Determine bidding prices

Diversify investments
Support a go/no-go decision in due diligences
4 Scenario Analysis
Assessment of a range of future
events by considering alternative
possible outcomes

Prepare business continuity plans

Analyze what-if scenarios in legal proposals
Forecast impacts of observable threats
5 Business Impact Analysis
Assessment of the consequences on
the business by potential threats and
disruption factors

Prepare protocols for disasters and crisis

Set when service disruptions are not tolerable
Determine response strategies
Negotiate liability clauses
 PERT
6 Program Evaluation and Review Technique

Assessment of best, most probable

and worst outputs using the
(best+base*4+worst)/6 formula

Assess losses for claims and compensations

Estimate the duration of tasks
Evaluate reasonableness of contractual
requirements
7 Sensitivity Analysis
Assessment of the relationship
between input and output variables

Prepare a tornado chart to assess importance

of variables
Identify the sources of risks in the assumptions
Design controls for executing a business plan
8 Lessons Learned
Review of historical information on risk
events to prevent reoccurrence

Analyze compliance breaches databases

Reduce customer complaints and disputes
Review of non-conformances in inspections
9 Data Analysis
Query of databases to identify
trends and distributions

Validate data used for planning assumptions

Calculate key risk indicators
Identify different types of distributions
10 Horizon Scanning
Outlook of early signs of potential
threats and opportunities

Set commercial, innovation, growth and legal

strategies
Prepare for disruptors for business plans
 Stress Testing
Impact estimation of drastic worst
scenarios, usually in the macro
economy

Calculate capital holdings for a portfolio

Assess hedging coverage levels
Estimate probabilities of credit defaults
Choose your side
Charlatans
They only have risk matrices (also known as heat
maps) based on opinions and debunked by science

Risk managers
They have a complete data-driven tool box
for different decision-making situations
Our
Case method