Risk map: risk identification and management

Abstract

A risk map is a tool, based on various information systems, that aims to identify the activities or processes at risk, quantify the probability of those events and measure the potential damage associated with their occurrence. That kind of map provides three valuable contributions to a Manager: integrated information about company overall risk exposure, summaries of the total economic value of the risks assumed at any given time, and tools to study those sources of risk. The risk map is implemented in a graphic interactive dashboard, similar to an information panel, able to emphasize abnormalities or deviations; it also allows the user to navigate trough all available data at different levels of disaggregation (drill-down). Concerning the company’s financial worries, the map helps to track of the key vulnerabilities – such as increases in the levels of overdue debts or exposure to a particular category of customers – and, in that sense, it can support the development of concrete strategies aimed to prevent financial failure. The paper extends previous evidences from banking and offers a meta-model of risk in non-financial firms, and a map specifically designed to monitor the key processes that lead to the events of insolvency and financial failure.