Risk Assessment (was: How many alternatives, concepts, or sketches are enough?)

20 Jan 2009 - 4:59pm
369 reads
christine chastain
2008

Thanks Doug! Indeed, identifying important relevant factors and coming up
with estimates and corresponding probabilities for innovation/products and
services that will not exist for a number of years, is an interesting
challenge! Won't you join us in trying to figure that out? :)

On Tue, Jan 20, 2009 at 3:39 PM, Anderson, Douglas W. <
Anderson.Douglas at mayo.edu> wrote:

>
> Hi Christine,
>
> Your description of a risk assessment model sounds like an echo from my
> business school days. Yes, such models are commonly used in business
> planning.
>
> The basic elements include the relevant external economic/social context
> and internal (company or foundation) conditions at discrete intervals (e.g.
> years, quarters, or months) over the period of time for which you are
> planning. Explore the best- and worst-case scenarios for the world and the
> foundation within the world. Select a most-likely scenario or several likely
> scenarios within the best-to-worst range. Attach probabilities to the
> various scenarios, summing to 100%. Quantify as many of the relevant
> characteristics of the world and the foundation (specifically costs and
> revenues related to the project, which might be derived from other
> characteristics) as you sensibly can for each scenario. Calculate the
> financial results at the end of each time interval for each scenario and
> apply the corresponding probability. Sum those products for each time
> interval. Apply some discount rate (interest rate, if you will) to come up
> with a present value for the set of sums.
>
> That tells you what the project is hypothetically worth today. If you are
> comparing alternative projects, do this for each project using the same
> external factors and probabilities for each. Compare the hypothetical values
> of the projects.
>
> The mechanics are easily handled in Excel or your spreadsheet of choice.
> The real challenge is identifying the important relevant factors and coming
> up with estimates and corresponding probabilities. That part can be very
> stimulating though, especially as a collaboration.
>
> FWIW,
> Doug Anderson
>
>
> Original message:
> Date: Mon, 19 Jan 2009 14:02:40 -0600
> From: christine chastain <chastain.christine at gmail.com>
> Subject: Re: [IxDA Discuss] How many alternatives, concepts, or
> sketches are enough?
> To: Chauncey Wilson <chauncey.wilson at gmail.com>
> Cc: discuss at ixda.org
> Message-ID:
> <262ba6ef0901191202s2a7694daj9caed9be48f9302a at mail.gmail.com>
> Content-Type: text/plain; charset=ISO-8859-1
>
> Here's the thing, though - this is a great start but I still don't see it
> linked to risk assessment and ultimately the bottom line...I know, what
> every designer/design researcher/innovator hates to hear...
>
> But, once again, I'm in the position of having to show, to the board of
> directors of a large non-profit foundation, how our budget will be used to
> support numerous platforms, under which reside numerous projects/concepts.
> Essentially, they would love to hear that one or another idea (in this
> case,
> the prioritization has already been made, based on collective criteria)
> will
> be a return on investment and I have no way, beyond presenting a business
> case study and linking concepts to future portfolio efforts, to provide
> that
> information. What I really need is a risk assessment/predictive model that
> looks at a variety of future scenarios and takes into account current and
> future business state/future general population need, etc. Has anyone heard
> of anything like that?
>

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