We've just discovered a glitch in the audio from 4.50-5.30, when David is discussing the new Escalate strategy. Sorry about that. Here is the text for the section where the audio is poor: "Just recently we’ve introduced a new strategy for both threats and opportunities. If you identify a risk that doesn’t belong to you, because it doesn’t affect your objectives, then maybe you should pass that on to somebody else who it does affect. So you are not going to exploit it or transfer it etc. I’m going to use the word “escalate” for the new strategy, to describe a risk that you found that isn’t yours, so you escalate it. This is not the same as risk transfer, it’s an escalation out of your area to somebody else. The term “risk escalation” has been used elsewhere in industry for some time and we thought it was a good word to adopt. So, now we have five strategies on each side. For threats the response strategies available are Avoid, Transfer, Reduce, Accept or Escalate. And for opportunities we have Exploit, Share, Enhance, Accept or Escalate." You can also read a short article from David on the Escalate strategy here: risk-doctor.com/wp-content/uploads/2020/05/108-Risk-escalation-DH.pdf
Hello David , in the quantitive analysis we calculate the contingency reserve (P*I) for ex. its 10000$ . While proceeding in risk response plan we choose the transfer strategy . We calculate the cost of transfer strategy and it will cost 30000$ . Who will pay the difference between the allocated contingency reserve and the actual cost of applying transfer strategy ?
Hi Moataz, thanks for this question. I disagree with your way of calculating contingency reserve using P*I. Imagine you have a risk with a 10% probability of occurring, and if it occurs the impact is $100K. If it does not occur, the impact is zero, but if it does occur the impact is $100K. Setting aside $10K for contingency reserve (P*I) will not help you, because you will need eiter zero or $100K - you will never need $10K! When deciding whether to use a transfer strategy, you need to compare the cost of making the transfer with the full impact of the risk occuring.
Hi Doctor. Thanks for the insightful strategies content. I find that I'm learning your teaching easier from your videos. Unfortunately, the voice in this video broken intermittently from 4.50 to 5.30. I can't gauge the ESCALATE strategy well. Could you reply here?