Risks involved in Organisational Change

Mergers, acquisitions or sales of businesses, and even the adoption of new business by internal generation all require an additional marginal analysis of risk in the organisation.

Average measures that are suitable as a measure of performance as part of an ongoing organisation are inappropriate to support decisions about organisational change - this is because the diversification benefits at the Group level can also change. This change needs to be assessed, particularly whether it is favourable or unfavourable.

The simplest way of achieving this flexibly is to model the change in risks that would occur with the organisational change in a "what-if" type scenario and then run full simulations for both this modelled scenario and the Group as it now stands. The comparison between the two Monte Carlo results provides the assessed marginal impact of the change including diversification benefits.

This "what-if" scenario modelling capacity can be built into the operational risk measurement database system and provides a fundamental tool for strategic planning for the organisation.

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Last updated:16/5/07

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