Quantitative risk management

Goal oriented & actionable

Predictive and stochastic

The causal map

Virtuous and vicious simplicity

Cycling shorts

  • Travel time is comprised of an undelayed travel time, calculated from an average speed, and delays
  • Delays are comprised of traffic lights and extraordinary delays, notably failures (puncture, breakdowns) and chance encounters
  • Speed is determined by wind — speed and direction — and form, effectively a constant related to power.
  • Dimensional analysis gives the speed as a function of the wind speed in the direction of travel and the power constant.
  • The power constant is fitted to data in the cases where 1) I’m fresh, 2) I haven’t slept well (lots of data — I have three small kids) and 3) I’m hungover (very few data for the same reason).

Decision time

New information

Prioritization

Additional controls

The manifold miseries of matrices

Matrix madness

Risk register

Take-aways

  • Models must be goal-oriented and actionable
  • They take their point of departure in decisions and objectives
  • Models should be predictive and stochastic
  • They are couched in the language of intervention and explicitly embrace uncertainty
  • Causal mapping is intuitive and accessible
  • It exploits causal intuition and provides accessible basis for rigorous mathematical modelling
  • Causal mapping is (virtuously) simple, scalable and fit-for-purpose
  • Models can be rolled up or folded out as required for decisions (and modelling detail)
  • Causal mapping provides a direct link to data and are verifiable
  • Models are built around available data
  • Models are checked and refined against prediction

Appendix: Details of the cycling model

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Mathematical modelling for business and the business of mathematical modelling. See stochastic.dk/articles for a categorized list of all my articles on medium.

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Graeme Keith

Graeme Keith

Mathematical modelling for business and the business of mathematical modelling. See stochastic.dk/articles for a categorized list of all my articles on medium.

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