Emerging Risk Initiative of the Year finalist: Fernando Vegas Fernández, Researcher (former CIO & CRO), UPM

Published on 2020-12-8

Who is Fernando Vegas, our finalist for the Emerging Risk Initiative of the Year Award?

Here is his statement:

Risk managers face two main challenges nowadays: to persuade the board of directors about the fact that risk management adds value and is not just something to meet compliance requirements; and the lack of the right tools to make it easy a decision-making process.

Risk Priority Number (ISO 31010), that is the product impact times likelihood, is usually used to rate risks and this value is non-intuitive and hard to understand. So, it is hard to decide what the most relevant risks are. Risk should be defined with its impact and likelihood, but risk managers do not know what the overall impact and likelihood are in a scenario such as a project, and they usually express the overall risk with just a single number: the sum of the products of impact times likelihood for every risk in the scenario (SPTI). This number is misleading and causes two projects with a very distinct risk to have the same SPTI value. Furthermore, this SPTI method is also used to estimate the total cost and that is just an error because it is an average value that could easily overrun with actual values up to three times higher.

I’ve developed a research project to fix all those issues that achieved a doctoral thesis and Julio Sáez’s price in 2019. It proposes a general-purpose quantitative an intuitive 0-100 key risk indicator, the “Risk Visibility Factor” (Fv); a summarizing method based on Fv to obtain the overall risk for any scenario, expressed as a single equivalent risk event with its impact and likelihood; and a simple method to calculate the overall cost with an 85% confidence level. I’ve developed a whole informatized risk system that has been implanted in a construction company and that can be also easily implanted with spreadsheets.

Click here to read the summary of his project