Value and risk management system for multi-enterprise organization

Abstract

An automated method and system ( 100 ) for defining, measuring and continuously monitoring the matrix of value and the matrix of risk for a multi-enterprise commercial organization. A complete matrix of value is developed for each enterprise in the organization using predictive models and vector creation algorithms. The matrices of enterprise value are then used to support the creation of scenarios that contain all enterprise risk factors. A series of scenarios under both normal and extreme conditions are then developed in order to develop a complete matrix of risk for each enterprise in the organization and the organization as a whole. The information from these matrices is then used to calculate and display the matrix of value for the organization, the matrix of risk for the organization and the efficient frontier for organization financial performance. Forecast changes to the organization and its environment are then mapped to the matrices of value and risk for the organization and analyzed using probabilistic simulation models.

1 . A organization risk management method, comprising: 
 integrating organization data from a variety of sources in accordance with a common schema;    transforming said data into information and models for managing risk at the organization level.    
     
     
         2 . The method of  claim 1  that further comprises using at least one of the models to identify the risk reduction activities and risk reduction purchases required to optimize organization risk.  
     
     
         3 . The method of  claim 1  where organization data is integrated in accordance with a common schema.  
     
     
         4 . The applications of  claim 3  where the common schema includes a common metadata standard, data structure and data dictionary.  
     
     
         5 . The method of  claim 1  wherein the variety of data sources are advanced financial systems, asset management systems, basic financial systems, alliance management systems, brand management systems, customer relationship management systems, channel management systems, estimating systems, intellectual property management systems, process management systems, supply chain management systems, vendor management systems, operation management systems, enterprise resource planning systems (ERP), material requirement planning systems (MRP), quality control systems, sales management systems, human resource systems, accounts receivable systems, accounts payable systems, capital asset systems, inventory systems, invoicing systems, payroll systems, purchasing systems, web site systems, the Internet, external databases, user input, risk management systems and combinations thereof.  
     
     
         6 . The method of  claim 1  where the data includes historical data, forecast data and combinations thereof.  
     
     
         7 . The method of  claim 1  where the data includes transaction data, descriptive data, geospatial data, text data, linkage data and combinations thereof.  
     
     
         8 . The method of  claim 1  where an organization is a single product, a group of products, a division, a entire company, a multi company corporation or a value chain.  
     
     
         9 . The method of  claim 1  where the information and models include item performance indicators, value drivers, composite variables, vectors, predictive component models, network models, element rankings, element relative contributions, factor contributions, element contributions, a matrix of enterprise value that integrates the preceding information by to determine the value of each element and factor to each enterprise by segment of value, a matrix of market value that sums the matrices of enterprise value to determine the contribution of each element and factor to the organization market value, option discount rates, valuations for each real option by enterprise, a valuation for all organization real options, covariance matrices, forecasts, scenarios, risk quantifications under different scenarios, a summary of organization financial status that can be communicated to financial service providers for use in automated transactions, organizational summaries of value and risk by segment of value and enterprise, probabilistic simulation models, the efficient frontier, a list of risk reduction activities and risk transfer product purchases that will optimize one or more aspects of organization financial performance and combinations thereof.  
     
     
         10 . The method of  claim 9  wherein the aspects of organization financial performance being optimized are selected from the group consisting of revenue, expense, capital change, current operation value, real option value, derivative value, investment value, market sentiment value, risk and business value.  
     
     
         11 . The method of  claim 9  where the risks being quantified and optimized are event risk, factor variability risk, element variability risk, contingent liabilities and combinations thereof.  
     
     
         12 . The method of  claim 11  where event risks are risks associated with accidents, weather phenomena including hurricanes and tornadoes and acts of nature including earthquakes and volcanoes.  
     
     
         13 . The method of  11  where the elements producing variability risk are alliances, brands, channels, customers, customer relationships, employees, employee relationships, information technology, intellectual property, knowledge, partnerships, processes, production equipment, vendors, vendor relationships and combinations thereof.  
     
     
         14 . The method of  11  where the factors producing variability risk are numerical indicators of: conditions or prices external to the organization and conditions or performance of the organization compared to external expectations of organization conditions or performance.  
     
     
         15 . The method of  claim 9  where the organization segments of value are current operations, real options, derivatives, excess financial assets, market sentiment and combinations thereof.  
     
     
         16 . The method of  claim 9  where the probabilistic model is a Markov Chain Monte Carlo model.  
     
     
         17 . The method of  claim 9  where a multi-criteria optimization can be used to determine the optimal mix of risk reduction activities and risk reduction purchases when two or more aspects of organization financial performance are being optimized.  
     
     
         18 . The method of  claim 9  where risk reduction purchases include insurance purchase, derivative purchase, swaps, swaptions, options, collars and combinations thereof.  
     
     
         19 . The method of  claim 9  where the scenarios are normal, extreme and a combination thereof.  
     
     
         20 . The method of  claim 9  where the efficient frontier identifies the maximum organization value for a given level of risk.  
     
     
         21 . The method of  claim 2  where the model is a Markov model.  
     
     
         22 . The method of  claim 2  where genetic algorithms are used for determining the optimal mix of risk reduction activities and risk reduction purchases.  
     
     
         23 . The method of  claim 24  where risk reduction purchases include insurance purchase, derivative purchase, swaps, swaptions, options, collars and combinations thereof.  
     
     
         24 . The method of  claim 1  that optionally displays the impact of the optimized mix of risk reduction activities and risk reduction purchases on the position of the organization relative to the efficient frontier.  
     
     
         25 . The method of  claim 1  where the information and models are made available for review using a paper document or electronic display.  
     
     
         26 . The method of  claim 1  where the information and models can be used for analyzing of potential mergers and acquisitions, evaluating of asset purchases, evaluating asset disposals, rating the ability of the organization to re-pay debt and monitoring the performance of outside vendors who have been hired to reduce risk.  
     
     
         27 . An organization risk system, comprising: 
 a plurality of computers connected by a network each with a processor having -circuitry to execute instructions; a storage device available to each processor with sequences of instructions stored therein, which when executed cause the processors to: 
 integrate organization data from a variety of sources in accordance with a common schema;  
 transform said data into information and models for managing and optimizing risk at the organization level.  
   
     
     
         28 . The system of  claim 27  where the information and models include item performance indicators, value drivers, composite variables, vectors, predictive component models, network models, element rankings, element relative contributions, factor contributions, element contributions, a matrix of enterprise value that integrates the preceding information by to determine the value of each element and factor to each enterprise by segment of value, a matrix of market value that sums the matrices of enterprise value to determine the contribution of each element and factor to the organization market value, option discount rates, valuations for each real option by enterprise, a valuation for all organization real options, covariance matrices, forecasts, scenarios, risk quantifications under different scenarios, a summary of organization financial status that can be communicated to financial service providers for use in automated transactions, organizational summaries of value and risk by segment of value and enterprise, probabilistic simulation models, the efficient frontier, a list of risk reduction activities and risk transfer product purchases that will optimize one or more aspects of organization financial performance and combinations thereof.  
     
     
         29 . The system of  claim 28  wherein the variety of data sources are advanced financial systems, asset management systems, basic financial systems, alliance management systems, brand management systems, customer relationship management systems, channel management systems, estimating systems, intellectual property management systems, process management systems, supply chain management systems, vendor management systems, operation management systems, enterprise resource planning systems (ERP), material requirement planning systems (MRP), quality control systems, sales management systems, human resource systems, accounts receivable systems, accounts payable systems, capital asset systems, inventory systems, invoicing systems, payroll systems, purchasing systems, web site systems, the Internet, external databases, user input, risk management systems and combinations thereof.  
     
     
         30 . The system of  claim 28  where the risks being managed and optimized are event risk, factor variability risk, element variability risk, contingent liabilities and combinations thereof.