Risk management for mathematical optimization under uncertainty

We present a general multistage stochastic mixed 0-1 problem where the uncertainty appears everywhere in the objective function, constraints matrix and right-hand-side. The uncertainty is represented by a scenario tree that can be a symmetric or a nonsymmetric one. The stochastic model is converted in a mixed 0-1 Deterministic Equivalent Model in compact representation. Due to the difficulty of the problem, the solution offered by the stochastic model has been traditionally obtained by optimizing the objective function expected value (i.e., mean) over the scenarios, usually, along a time horizon. This approach (so named risk neutral) has the inconvenience of providing a solution that ignores the variance of the objective value of the scenarios and, so, the occurrence of scenarios with an objective value below the expected one. Alternatively, we present several approaches for risk averse management, namely, a scenario immunization strategy, the optimization of the well known Value-at-Risk (VaR) and several variants of the Conditional Value-at-Risk strategies, the optimization of the expected mean minus the weighted probability of having a "bad" scenario to occur for the given solution provided by the model, the optimization of the objective function expected value subject to stochastic dominance constraints (SDC) for a set of profiles given by the pairs of threshold objective values and either bounds on the probability of not reaching the thresholds or the expected shortfall over them, and the optimization of a mixture of the VaR and SDC strategies.

Risk management e ambiente controlo mitigadores. Negócio da banca

A identidade de uma Instituição é a imagem que lhe é associada pelo mercado e sociedade em geral, é o resultado do conjunto de princípios, valores e comportamentos exercidos pelos seus colaboradores e clientes, devendo aderir a elevados padrões de ética profissional e evitar situações suscetíveis de originar conflitos de interesse e fraude. Nos últimos anos várias situações têm vindo a público de posições menos claras por parte das organizações e dos seus colaboradores. Tal realidade pode ter diversas justificações, nomeadamente a atual crise económica e a crescente crise de valores existente na sociedade em geral. A necessidade de eficácia no cumprimento de objetivos extremamente exigentes com a maior eficiência dos cada vez mais reduzidos recursos exige dos responsáveis, ou de quem tem que tomar decisões, um maior conhecimento e saber no desempenho das suas atividades. A informação constitui, na atual realidade económica, um poderoso ativo para o exercício das suas funções, e em particular, para o apoio à sua tomada de decisão. As organizações com elevado grau de descentralização têm na Auditoria Interna um complemento indispensável, na medida em que pode ajudar na eliminação de desperdícios, simplificar tarefas, reduzir custos e minimizar riscos, constituindo uma função de apoio á gestão, sendo capaz de auxiliar em diversas áreas tais como: “corporate governance”, ética, gestão de risco, controlo interno e “compliance”, tecnologias de informação, qualidade e ambiente. Os procedimentos de auditoria são processados por pessoas, daí a importância do comportamento humano e da própria cultura organizacional. A essência de qualquer negócio são as pessoas, suas características, integridade moral, ética e competências pessoais e profissionais, no entanto os objetivos delineados regulam todo o seu “modus operandi”, com definição clara do “core business”.

Concepts about risk management in libraries : Notes for characterization

El presente trabajo revisa la bibliografía sobre gestión del riesgo (GRi) que ha aparecido en los últimos tiempos, intentando anclar sus nociones, recomendaciones, pautas y estándares al ámbito de las bibliotecas y centros de documentación e información. Se analiza su utilidad, realizando un balance sobre la bibliografía consultada, proveniente tanto de Argentina como de distintos países. Se concluye sobre la necesidad de aplicar los procesos y los estándares inherentes a la GRi a los de las unidades de información para evitar los peligros o las amenazas en distintos ámbitos tales como el financiero, comunicacional, tecnológico, humano, ambiental, entre otros

Reviewing the hedge funds literature II:hedge funds' returns and risk management characteristics

This paper summarizes the literature on hedge funds (HFs) developed over the last two decades, particularly that which relates to risk management characteristics (a companion piece investigates the managerial characteristics of HFs). It discusses the successes and the shortfalls to date in developing more sophisticated risk management frameworks and tools to measure and monitor HF risks, and the empirical evidence on the role of the HFs and their investment behaviour and risk management practices on the stability of the financial system. It also classifies the HF literature considering the most recent contributions and, particularly, the regulatory developments after the 2007 financial crisis.

Geometrical Methods in Multivariate Risk Management: Algorithms and Applications

This thesis builds a framework for evaluating downside risk from multivariate data via a special class of risk measures (RM). The peculiarity of the analysis lies in getting rid of strong data distributional assumptions and in orientation towards the most critical data in risk management: those with asymmetries and heavy tails. At the same time, under typical assumptions, such as the ellipticity of the data probability distribution, the conformity with classical methods is shown. The constructed class of RM is a multivariate generalization of the coherent distortion RM, which possess valuable properties for a risk manager. The design of the framework is twofold. The first part contains new computational geometry methods for the high-dimensional data. The developed algorithms demonstrate computability of geometrical concepts used for constructing the RM. These concepts bring visuality and simplify interpretation of the RM. The second part develops models for applying the framework to actual problems. The spectrum of applications varies from robust portfolio selection up to broader spheres, such as stochastic conic optimization with risk constraints or supervised machine learning.

Magnitude and frequency: challenges for the assessment of vulnerability to geomorphic hazards

In natural hazard research, risk is defined as a function of (1) the probability of occurrence of a hazardous process, and (2) the assessment of the related extent of damage, defined by the value of elements at risk exposed and their physical vulnerability. Until now, various works have been undertaken to determine vulnerability values for objects exposed to geomorphic hazards such as mountain torrents. Yet, many studies only provide rough estimates for vulnerability values based on proxies for process intensities. However, the deduced vulnerability functions proposed in the literature show a wide range, in particular with respect to medium and high process magnitudes. In our study, we compare vulnerability functions for torrent processes derived from studies in test sites located in the Austrian Alps and in Taiwan. Based on this comparison we expose needs for future research in order to enhance mountain hazard risk management with a particular focus on the question of vulnerability on a catchment scale.

Maps as risk mitigation tools. Adaptation of the Swiss hazard assessment and mapping methodology to a Moroccan site: Beni Mellal

Dans le contexte climatique actuel, les régions méditerranéennes connaissent une intensification des phénomènes hydrométéorologiques extrêmes. Au Maroc, le risque lié aux inondations est devenu problématique, les communautés étant vulnérables aux événements extrêmes. En effet, le développement économique et urbain rapide et mal maîtrisé augmente l'exposition aux phénomènes extrêmes. La Direction du Développement et de la Coopération suisse (DDC) s'implique activement dans la réduction des risques naturels au Maroc. La cartographie des dangers et son intégration dans l'aménagement du territoire représentent une méthode efficace afin de réduire la vulnérabilité spatiale. Ainsi, la DDC a mandaté ce projet d'adaptation de la méthode suisse de cartographie des dangers à un cas d'étude marocain (la ville de Beni Mellal, région de Tadla-Azilal, Maroc). La méthode suisse a été adaptée aux contraintes spécifiques du terrain (environnement semi-aride, morphologie de piémont) et au contexte de transfert de connaissances (caractéristiques socio-économiques et pratiques). Une carte des phénomènes d'inondations a été produite. Elle contient les témoins morphologiques et les éléments anthropiques pertinents pour le développement et l'aggravation des inondations. La modélisation de la relation pluie-débit pour des événements de référence, et le routage des hydrogrammes de crue ainsi obtenus ont permis d'estimer quantitativement l'aléa inondation. Des données obtenues sur le terrain (estimations de débit, extension de crues connues) ont permis de vérifier les résultats des modèles. Des cartes d'intensité et de probabilité ont été obtenues. Enfin, une carte indicative du danger d'inondation a été produite sur la base de la matrice suisse du danger qui croise l'intensité et la probabilité d'occurrence d'un événement pour obtenir des degrés de danger assignables au territoire étudié. En vue de l'implémentation des cartes de danger dans les documents de l'aménagement du territoire, nous nous intéressons au fonctionnement actuel de la gestion institutionnelle du risque à Beni Mellal, en étudiant le degré d'intégration de la gestion et la manière dont les connaissances sur les risques influencent le processus de gestion. L'analyse montre que la gestion est marquée par une logique de gestion hiérarchique et la priorité des mesures de protection par rapport aux mesures passives d'aménagement du territoire. Les connaissances sur le risque restent sectorielles, souvent déconnectées. L'innovation dans le domaine de la gestion du risque résulte de collaborations horizontales entre les acteurs ou avec des sources de connaissances externes (par exemple les universités). Des recommandations méthodologiques et institutionnelles issues de cette étude ont été adressées aux gestionnaires en vue de l'implémentation des cartes de danger. Plus que des outils de réduction du risque, les cartes de danger aident à transmettre des connaissances vers le public et contribuent ainsi à établir une culture du risque. - Severe rainfall events are thought to be occurring more frequently in semi-arid areas. In Morocco, flood hazard has become an important topic, notably as rapid economic development and high urbanization rates have increased the exposure of people and assets in hazard-prone areas. The Swiss Agency for Development and Cooperation (SADC) is active in natural hazard mitigation in Morocco. As hazard mapping for urban planning is thought to be a sound tool for vulnerability reduction, the SADC has financed a project aimed at adapting the Swiss approach for hazard assessment and mapping to the case of Morocco. In a knowledge transfer context, the Swiss method was adapted to the semi-arid environment, the specific piedmont morphology and to socio-economic constraints particular to the study site. Following the Swiss guidelines, a hydro-geomorphological map was established, containing all geomorphic elements related to known past floods. Next, rainfall / runoff modeling for reference events and hydraulic routing of the obtained hydrographs were carried out in order to assess hazard quantitatively. Field-collected discharge estimations and flood extent for known floods were used to verify the model results. Flood hazard intensity and probability maps were obtained. Finally, an indicative danger map as defined within the Swiss hazard assessment terminology was calculated using the Swiss hazard matrix that convolves flood intensity with its recurrence probability in order to assign flood danger degrees to the concerned territory. Danger maps become effective, as risk mitigation tools, when implemented in urban planning. We focus on how local authorities are involved in the risk management process and how knowledge about risk impacts the management. An institutional vulnerability "map" was established based on individual interviews held with the main institutional actors in flood management. Results show that flood hazard management is defined by uneven actions and relationships, it is based on top-down decision-making patterns, and focus is maintained on active mitigation measures. The institutional actors embody sectorial, often disconnected risk knowledge pools, whose relationships are dictated by the institutional hierarchy. Results show that innovation in the risk management process emerges when actors collaborate despite the established hierarchy or when they open to outer knowledge pools (e.g. the academia). Several methodological and institutional recommendations were addressed to risk management stakeholders in view of potential map implementation to planning. Hazard assessment and mapping is essential to an integrated risk management approach: more than a mitigation tool, danger maps represent tools that allow communicating on hazards and establishing a risk culture.

Characterization and management of rockslide hazard at Turtle Mountain, Alberta, Canada

In 1903, more than 30 million m3 of rock fell from the east slopes of Turtle Mountain in Alberta, Canada, causing a rock avalanche that killed about 70 people in the town of Frank. The Alberta Government, in response to continuing instabilities at the crest of the mountain, established a sophisticated field laboratory where state-of-the-art monitoring techniques have been installed and tested as part of an early-warning system. In this chapter, we provide an overview of the causes, trigger, and extreme mobility of the landslide. We then present new data relevant to the characterization and detection of the present-day instabilities on Turtle Mountain. Fourteen potential instabilities have been identified through field mapping and remote sensing. Lastly, we provide a detailed review of the different in-situ and remote monitoring systems that have been installed on the mountain. The implications of the new data for the future stability of Turtle Mountain and related landslide runout, and for monitoring strategies and risk management, are discussed.

Modeling of dangerous phenomena and innovative techniques for hazard evaluation and risk mitigation

Society is frequently exposed to and threatened by dangerous phenomena in many parts of the world. Different types of such phenomena require specific actions for proper risk management, from the stages of hazard identification to those of mitigation (including monitoring and early-warning) and/or reduction. The understanding of both predisposing factors and triggering mechanisms of a given danger and the prediction of its evolution from the source to the overall affected zone are relevant issues that must be addressed to properly evaluate a given hazard.

The importance of risk assessment in the context of investment project management: a case study

Risk management is an important component of project management. Nevertheless, such process begins with risk assessment and evaluation. In this research project, a detailed analysis of the methodologies used to treat risks in investment projects adopted by the Banco da Amazonia S.A. was made. Investment projects submitted to the FNO (Constitutional Fund for Financing the North) during 2011 and 2012 were considered for that purpose. It was found that the evaluators of this credit institution use multiple indicators for risk assessment which assume a central role in terms of decision-making and contribute for the approval or the rejection of the submitted projects; namely, the proven ability to pay, the financial records of project promotors, several financial restrictions, level of equity, level of financial indebtedness, evidence of the existence of a consumer market, the proven experience of the partners/owners in the business, environmental aspects, etc. Furthermore, the bank has technological systems to support the risk assessment process, an internal communication system and a unique system for the management of operational risk.

Social perceptions of floods and flood management in a Mediterranean area (Costa Brava, Spain)

Taking as an example three study cases in the Costa Brava area, this paper examines the social perceptionof floods through surveys, interviews and Focus Group sessions. Perception is then related to vulnerability, flood management, and citizen’s preferences regarding alternatives to curb flood losses in the future. The study concludes that flood awareness and the willingness to take actions regarding this hazard are clearly related to the degree of social involvement with the affairs of the local community. Furthermore, participatory settings such as Focus Group sessions appear to enable a better environment for assessing and implementing flood management options that attempt to modify human activities rather than modify natural processes as has been frequently the case in the past

Interdisciplinary research for the analysis and risk assesment : the case of the municipality of Uspantan Guatemala

Short description of the proposed presentation * lees than 100 words This paper describes the interdisciplinary work done in Uspantán, Guatemala, a city vulnerable to natural hazards. We investigated local responses to landslides that happened in 2007 and 2010 and had a strong impact on the local community. We show a complete example of a systemic approach that incorporates physical, social and environmental aspects in order to understand risks. The objective of this work is to present the combination of social and geological data (mapping), and describe the methodology used for identification and assessment of risk. The article discusses both the limitations and methodological challenges encountered when conducting interdisciplinary research. Describe why it is important to present this topic at the Global Platform in less than 50 words This work shows the benefits of addressing risk in an interdisciplinary perspective, in particular how integrating social sciences can help identify new phenomena and natural hazards and assess risk. It gives a practical example of how one can integrate data from different fields. What is innovative about this presentation? * The use of mapping to combine qualitative and quantitative data. By coupling approaches, we could associate a hazard map with qualitative data gathered by interviews with the population. This map is an important document for the authorities. Indeed, it allows them to be aware of the most dangerous zones, the affected families and the places where it is most urgent to intervene.

Management of nanomaterials safety in research environment

Despite numerous discussions, workshops, reviews and reports about responsible development of nanotechnology, information describing health and environmental risk of engineered nanoparticles or nanomaterials is severely lacking and thus insufficient for completing rigorous risk assessment on their use. However, since preliminary scientific evaluations indicate that there are reasonable suspicions that activities involving nanomaterials might have damaging effects on human health; the precautionary principle must be applied. Public and private institutions as well as industries have the duty to adopt preventive and protective measures proportionate to the risk intensity and the desired level of protection. In this work, we present a practical, 'user-friendly' procedure for a university-wide safety and health management of nanomaterials, developed as a multi-stakeholder effort (government, accident insurance, researchers and experts for occupational safety and health). The process starts using a schematic decision tree that allows classifying the nano laboratory into three hazard classes similar to a control banding approach (from Nano 3 - highest hazard to Nano1 - lowest hazard). Classifying laboratories into risk classes would require considering actual or potential exposure to the nanomaterial as well as statistical data on health effects of exposure. Due to the fact that these data (as well as exposure limits for each individual material) are not available, risk classes could not be determined. For each hazard level we then provide a list of required risk mitigation measures (technical, organizational and personal). The target 'users' of this safety and health methodology are researchers and safety officers. They can rapidly access the precautionary hazard class of their activities and the corresponding adequate safety and health measures. We succeed in convincing scientist dealing with nano-activities that adequate safety measures and management are promoting innovation and discoveries by ensuring them a safe environment even in the case of very novel products. The proposed measures are not considered as constraints but as a support to their research. This methodology is being implemented at the Ecole Polytechnique de Lausanne in over 100 research labs dealing with nanomaterials. It is our opinion that it would be useful to other research and academia institutions as well. [Authors]

Minimal analytical characterisation of engineered nanomaterials need for hazard assessment in biological matrices

The safe and responsible development of engineered nanomaterials (ENM), nanotechnology-based materials and products, together with the definition of regulatory measures and implementation of "nano"-legislation in Europe require a widely supported scientific basis and sufficient high quality data upon which to base decisions. At the very core of such a scientific basis is a general agreement on key issues related to risk assessment of ENMs which encompass the key parameters to characterise ENMs, appropriate methods of analysis and best approach to express the effect of ENMs in widely accepted dose response toxicity tests. The following major conclusions were drawn: Due to high batch variability of ENMs characteristics of commercially available and to a lesser degree laboratory made ENMs it is not possible to make general statements regarding the toxicity resulting from exposure to ENMs. 1) Concomitant with using the OECD priority list of ENMs, other criteria for selection of ENMs like relevance for mechanistic (scientific) studies or risk assessment-based studies, widespread availability (and thus high expected volumes of use) or consumer concern (route of consumer exposure depending on application) could be helpful. The OECD priority list is focussing on validity of OECD tests. Therefore source material will be first in scope for testing. However for risk assessment it is much more relevant to have toxicity data from material as present in products/matrices to which men and environment are be exposed. 2) For most, if not all characteristics of ENMs, standardized methods analytical methods, though not necessarily validated, are available. Generally these methods are only able to determine one single characteristic and some of them can be rather expensive. Practically, it is currently not feasible to fully characterise ENMs. Many techniques that are available to measure the same nanomaterial characteristic produce contrasting results (e.g. reported sizes of ENMs). It was recommended that at least two complementary techniques should be employed to determine a metric of ENMs. The first great challenge is to prioritise metrics which are relevant in the assessment of biological dose response relations and to develop analytical methods for characterising ENMs in biological matrices. It was generally agreed that one metric is not sufficient to describe fully ENMs. 3) Characterisation of ENMs in biological matrices starts with sample preparation. It was concluded that there currently is no standard approach/protocol for sample preparation to control agglomeration/aggregation and (re)dispersion. It was recommended harmonization should be initiated and that exchange of protocols should take place. The precise methods used to disperse ENMs should be specifically, yet succinctly described within the experimental section of a publication. 4) ENMs need to be characterised in the matrix as it is presented to the test system (in vitro/ in vivo). 5) Alternative approaches (e.g. biological or in silico systems) for the characterisation of ENMS are simply not possible with the current knowledge. Contributors: Iseult Lynch, Hans Marvin, Kenneth Dawson, Markus Berges, Diane Braguer, Hugh J. Byrne, Alan Casey, Gordon Chambers, Martin Clift, Giuliano Elia1, Teresa F. Fernandes, Lise Fjellsbø, Peter Hatto, Lucienne Juillerat, Christoph Klein, Wolfgang Kreyling, Carmen Nickel1, and Vicki Stone.