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  1. Hi Mike,

    Hope you are doing well. I wanted to know if calculation of risk using standard deviation or calculating risk portfolios is applicable for the march 2016 exams. In some other lecture notes i saw that there is CAPM , calculating beta and so on…

    Will we be examined on those calculations?

    Many thanks for your assistance.

  2. Mike I was listening to your lecture this morning going to work and came across the example of the lady at the McDonalds getting ‘some mild discomfort’, and luckily for me and you both, the train carriage to Imperial Wharf was fully packed and I was squished like a sardine and could not reply to tell you what I thought of your example.
    Although obviously a great example for us to get our head around anticipating and mitigating risk, the way that you made your point was very conservative with the facts due to:
    1) The lady affected given in the example was not driving and did not brake when the coffee spilt – she was a passenger
    2) Her experience of “some discomfort” – consisted in skin grafting followed by TWO years of medical treatment.
    3) Internal documents obtained from McDonald’s showed that from 1982 to 1992 the company had received more than 700 reports of people burned by McDonald’s coffee to varying degrees of severity, and had settled claims arising from scalding injuries for more than $500,000. McDonald’s quality control manager, Christopher Appleton, testified that this number of injuries was insufficient to cause the company to evaluate its practices.

    Other than that, the story was entirely correct.

    P.s. “A lack of awareness automatically indicates that an entity has an inappropriate risk management strategy”……so perhaps, the example given was not so much a frivolous case after all, maybe what actually happened was that the lower structures of employees at McDonalds were not aware of the overall corporate strategy in regards to risk…thus clearly proving that McDonalds lacked efficient internal controls…..If I were an auditor I would be thinking of a Disclaimer of an opinion right now 馃檪

    P.p.s. I passed my last exam taught by you. You done OK in that one, you should congratulate yourself! 馃檪

    • WOW!

      Ok, so factually slightly flawed ( ! ) I’ll accept that. But the basic principle remains the same

      Also interesting that “the restaurant case” mentioned by “nogoogboyo” in the post of June 19, 2012 lower down this page could be interpreted as contradictory to yours!

  3. I thoroughly enjoy these lectures. Many thanks to Mr Mike. Just a small question, the risk manager heads the risk committee which is a part of the board that deals with risk strategy, how then is his role limited to implementation?

  6. Love the lectures Mike. They’ve helped me so much with this rather boring paper. I’ll be glad to get this one out of the way.
    BTW. The Winnebago (Grazinski v Winnebago) and the restaurant story (Amber Carson) are both sadly fictitious. And before you blame anyone, it wasn’t me that started the stories!!
    Cheers

  8. Hi

    Sorry for not explaining absolutely everything within the lectures ( nor within the course notes! )

    ALARP, the acronym, stands for As Low As Reasonably Possible and is in effect the management of risk bearing in mind a cost / benefit consideration. Risk can be reduced to zero by avoidance, but that may deprive you of benefit. So, in accepting that risks will be present in any business environment / situation, companies can take steps to manage the risks. Clearly, by throwing money at a problem, risk can often be reduced to minimal levels. However the benefit of such reduction may well be out-weighed by the cost.

    So, reduce risk to levels which qualify as ALARP

    Does that help?

  9. its good but did not explain related and co related risk, ALARP which is an important topic,and dynamic assessment of risk by risk management,
    kindly update me regarding above topics such as ALARP ,related and corelated risk,and dynamic assessment of risk

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