2.1  Many companies have project management offices. These offices deal with risk associated to projects that are strategically important to the organization. The PMO office manages corporate risk based on the company policies. The PMO analyzes the risk associated to each project and accept or reject a project. Some of the techniques used in the PMO such as brainstorming, assumption analysis, interviewing, probability-impact tables, risk matrix chart, and project risk management road mapping. These tools are very important to risk tolerance measurement of an organization. The COF or CRO sets the level of risk the company will accept and the PMO will only take on projects that meet these conditions. Can anyone cite specific examples that utilized one of the risk measurements?

2.2   Many of these risk measurement techniques you mentioned are born out of project management; do these techniques apply generically across other industries? How would we apply these to the different industries? What measurements do you think will fit the industry you are in? If we are a domestic company are we concerned about country risk?

What are everyone’s thoughts on this? Can we cite specific examples?

2.3  Consider risk controls or lack of controls. This is where Sarbanes Oxley came from. Also Basel II was derived to help with controls risk. “Basel II defines operational risk as ‘the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.’ It includes risks arising from such recent headline-grabbing events as internal and external fraud, errant employment practices, faulty workplace safety rules and procedures, risks of improper clients, products and business practices, losses from damage to physical assets, business interruptions and systems failures, and failures in trade execution, delivery and process management.” (Securities Industry News, 2008) Society General and Bears Stearns missed the internal control issues that Basel II had been created for.

The recent mortgage melt down was due to internal control issues. There were risk calculation challenges and lack of oversight. The credit and mortgage industry is still recovering as the now face additional regulatory and oversight risks.

What additional risk measurements can anyone think of that would help in these two examples?

Operational risk management to the rescue. (2008, May). Securities Industry News, 1.

2.4 When we look at country risk there are many different factors to consider. Regulatory, legal, wars, insurgencies, government take-over, and tariffs to name a few. I work for a company that consults with financial institutions (FI) on anti-money laundering matters. We have a presence in Brazil. This is a very risky operation for all of the reasons I mentioned above. We are trying to improve the reputations of the FIs in the country by helping them to meet the regulatory requirements of the United States and the European Union. There is a great deal of money these FIs can make doing legitimate financial business with the rest of the world. With all of these risks we need to have strong risk mitigation plans otherwise who would insure us? Is insurance enough? According to Sammer (2006) we need to manage the cost of risk and not just rely on insurance.

What may be some of the risks if we were to operate in Venezuela? Does anyone have any thoughts on this?

Sammer, J. (2006, March). Measuring the cost of risk. Business Finance, 12(3), 49-52.

2.5  Consider if a company, say Exxon chooses to operating in Venezuela what risk would they face? How would you quantify that?