A Theoretical Framework for Operational Risk Management and Opportunity Realisation

Advanced probability models are used to evaluate risks and to justify decisions where reliable data is available, e.g. reinsurance, money markets and nuclear energy. Operational risk management – the trade-offs made to run an efficient and effective organisation – has much less, and lower quality, data. In the first part of the paper, observations are made about the factors shaping operational risk management: the increasing shift of influence from tangible to intangible variables; the intuitive manner in which most operational risk is managed; the dynamic nature of the trade-offs balancing risk and reward; and in particular, that the critical factor in managing risk and opportunity is often how each choice feels rather than how a rational choice should be made. An economic framework is then used to examine the optimal relationship between operational risk and reward. Although operational risk management has many investment characteristics, players are bias towards minimising risks rather than maximising opportunities. This is because of uncertainty over the variables, and better knowledge of costs than rewards. The conclusion is that an overt, systematic approach to managing operational risk will be more effective and efficient than allowing an informal, intuitive process to operate. This requires that assumptions and the judgement process must be made explicit; that the value of intangibles should be appreciated; and that the knowledge gained by individuals in managing risk should be codified and retained by the host organisation.

Improving the process of coal extraction based on the parameter optimization of mining equipment

The aim of this paper is to develop and validate methods of choosing the means of the mining face mechanization. This paper analyses existing methods of optimizing processes in mining. It was established that the effectiveness of the performance map of coal field is formed by a group of technological, operational, and economic parameters which can be represented as a vector of solutions. To find the optimal solution, it was suggested to use network models and graphs. The essence of the technique is to represent the input and output (production level, prime cost) resource flows in an organized structure. Regularities of forming technological schemes of coalfield operation with a given level of performance, taking into account the relationship between technological parameters of mining face, operational parameters of the stoping equipment, technical and economic performance are defined. We developed the system for decision- making support, which allows optimizing operational parameters, reducing the production prime cost, and selecting the structure of the mechanized complex of stoping equipment with a specified level of performance. This paper describes approaches that can be used at the design stage of mining face and in the process of operation

Comparative Approach between Organizational Life Cycle and Rational Biological Model

This paper proposes an analogy between rational biological model and the organizations’ development during their existence. So, organizations’ "birth" or creation are considered the result of genetic algorithms, transformations are identified with changes that aim the adapting to the environment, and finally the ”death” treats the state of crisis and bankruptcy. In every stage of life there are proposals to increase it, by extension of states identified in the human area and not taken into account in the artificial one, which must learn from the first system, which we consider superior in the process of evolution. Although the authors’ approaches, do not build operational models to support the thesis presented, ask questions and focus on elements of management philosophy that "tomorrow" will certainly be resolved.genetic algorithms; organizational pathology; step by step evolution; tandem management change - organizational change.

Rationality, irrationality and economic cognition

This paper contrasts the modern use of the assumption that rationality as reflected in simple models of utility and profit maximization guides individual economic behaviour to literature both between 1890 and 1930 which sharply challenged the use of such an assumption and later literature in economic psychology from Herbert Simon onwards which sees economic (and other) cognitive processes in different ways. Some of the earlier literature proposed objective and operational notions of rationality based on the availability of information, ability to reason (cognitive skills), and even morality. Learning played a major role in individuals achieving what was referred to as complete rationality. I draw on these ideas, and suggest that developing models in which economic agents have degrees (or levels) of economic cognition which are endogenously determined could both change the perceptions economists have on policy matters and incorporate findings from recent economic psychology literature. This would remove the issue of whether economic agents are dichotomously rational or irrational, and instead introduce continuous metrics of cognition into economic thinking. Such an approach also poses the two policy issues of whether raising levels of economic cognition should be an objective of policy and whether policy interventions motivated by departures from full economic cognition should be analyzed

Development, test and comparison of two Multiple Criteria Decision Analysis(MCDA) models: A case of healthcare infrastructure location

When planning a new development, location decisions have always been a major issue. This paper examines and compares two modelling methods used to inform a healthcare infrastructure location decision. Two Multiple Criteria Decision Analysis (MCDA) models were developed to support the optimisation of this decision-making process, within a National Health Service (NHS) organisation, in the UK. The proposed model structure is based on seven criteria (environment and safety, size, total cost, accessibility, design, risks and population profile) and 28 sub-criteria. First, Evidential Reasoning (ER) was used to solve the model, then, the processes and results were compared with the Analytical Hierarchy Process (AHP). It was established that using ER or AHP led to the same solutions. However, the scores between the alternatives were significantly different; which impacted the stakeholders‟ decision-making. As the processes differ according to the model selected, ER or AHP, it is relevant to establish the practical and managerial implications for selecting one model or the other and providing evidence of which models best fit this specific environment. To achieve an optimum operational decision it is argued, in this study, that the most transparent and robust framework is achieved by merging ER process with the pair-wise comparison, an element of AHP. This paper makes a defined contribution by developing and examining the use of MCDA models, to rationalise new healthcare infrastructure location, with the proposed model to be used for future decision. Moreover, very few studies comparing different MCDA techniques were found, this study results enable practitioners to consider even further the modelling characteristics to ensure the development of a reliable framework, even if this means applying a hybrid approach

Ethics and OR: Operationalising Discourse Ethics

Operational researchers help managers decide what they ought to do and yet this is generally evaluated in terms of efficiency or effectiveness, not ethicality. However, the combination of the tremendous power of global corporations and the financial markets, and the problems the world faces in terms of economic and environmental sustainability, has led to a revival of interest in ethical approaches. This paper explores a relatively recent and innovative process called discourse ethics. This is very different from traditional ethical systems in taking ethical decisions away from individuals or committees and putting them in the hands of the actual people who are involved and affected through processes of debate and deliberation. The paper demonstrates that discourse ethics has strong connections to OR, especially in the areas of soft and critical systems, and that OR can actually contribute to the practical operationalisation of discourse ethics. At the same time, discourse ethics can provide a rigorous discursive framework for “ethics beyond the model"

Planning: Applied Rationality or Contingent Practice?

This paper develops an interactional approach to planning in organisations that draws out the relevance of both rationalist and contingent models of planning. The distinction between these two models is developed in the light of the modernist / postmodernist debate to provide a set of theoretical issues to with planning in organisations. These issues are explored in the context of planning carried out in two empirically studied settings, a health authority and a school. The two models are found to provide resources for organisations and participants in these settings, both to proceed with planning activity and to account for it. Neither model is however adequate to describe the process of planning which is always a practical and situated activity whose character emerges in the process of interaction