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PHILADELPHIA Companies cannot approach risk the same way they have in the past, and the intelligent use of data can make the difference, two risk management analysts said Tuesday.
“We know we can’t keep working the same we did 100 years ago, or 10 years ago, or even last year,” said Anna Pierce, manager of environmental health and safety and enterprise risk initiatives at GE Oil & Gas. “The world’s evolving. Everything’s becoming faster and more interconnected. And with that increased speed comes increased competition, higher expectations and more risk.”
Ms. Pierce and Robert Reville, CEO of Praedicat Inc., a Los Angeles-based risk modeling company, spoke during a presentation on the use of big data Tuesday at the Risk & Insurance Management Society Inc.’s annual conference in Philadelphia.
“When you’re looking at major technological innovation, you’re ... almost always looking at something that is interacting with its environment in a completely novel way,” Mr. Reville said. “The problem is that the downstream consequence s … and how it interacts with the wider environment over its life cycle is unknown in advance. No matter how much you try to guess or understand it, you won’t know. And it’s only over time that this is revealed, and it’s typically revealed by science.”
Ms. Pierce stressed the need to be proactive, rather than reactive, when dealing with risk.
“It’s all about perspective,” she said. “If you have the perspective that everything and every risk is a no, you don’t get very far in the business world. Corporate America has to be a little bit more ready to take on risk than what we were years ago.”
Ms. Pierce said GE partnered with Praedicat so the modeler could review important scientific studies and “crunch all of that scientific information down into something digestible that we could use.”
“We can’t read 8,000 papers on a given topic and say, ‘I understand 100% what all the risks are,’” she said.
Ms. Pierce discussed GE’s experience with the risks associated with fracking, the controversial process of injecting liquid at high pressure into subterranean rocks to force open existing fissures and extract oil or gas. The practice has been associated with earthquakes, water contamination and other issues.
The information provided by Praedicat helps GE make more nimble business decisions, she said.
By using big data, Ms. Pierce said GE could see the results of scientific research and determine the validity of the various issues related to fracking.
As an example of long-term consequences, Mr. Reville cited the case of asbestos, which was widely used and hailed for its fire-retardant properties, but which was later discovered to be toxic, leading to $200 billion in litigation and bankruptcies.
“Today our economy is generating an ever-increasing flow of ‘new asbestos,’” he said. “They may not have the downstream consequences of asbestos … but they (have) innovations with unknown consequences downstream.”
Genetically modified organisms, nanotechnology, 3-D printing and fracking are innovations with unknown downstream consequences, Mr. Reville said, and “we’re relying on science to ultimately understand the increasing risk that is associated” with them.
PHILADELPHIA Success in risk management comes in many different forms and can extend beyond the scope of traditional risk management responsibilities, a panel of risk managers said Tuesday at the Risk & Insurance Management Society Inc.’s annual conference in Philadelphia.