Using risk connectivity and contagion to add value – how analytics are revolutionising the approach to risk

Abstract

Companies are seeking more agility in how risk is managed. Businesses need a real-time view of risks underpinning decision making and, in an increasingly connected world, they want to plan for what is on the horizon to create competitive advantage. Management and boards are also asking questions about how strategic risks focus on, compare against and map to the well-grounded operational risk profile. Applying network theory, analytics and artificial intelligence creates an opportunity for risk management to drive strategy, reduce costs and add rigour to decision making. The significant competitive advantage gained through thinking about risk differently and incorporating greater focus on emerging risks can establish the resilience needed in a rapidly changing world. This paper considers how resilience, profitability and ultimately competitiveness can be enhanced through the application of technology, analytics and network theory to understand the interconnectivity, contagion as well as aggregation of risks and mapping of operational risk profiles to strategic risk profiles.