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You May Be Swimming In Risk, But Can You Measure It?

Companies begin to tackle one of the hardest jobs facing any risk manager--how to come up with a value and a relative priority for operational risks

By Russ Banham | Updated on April 01, 2006

It may not take a rocket scientist to solve most problems, but that isn’t necessarily the case when it comes to risk quantification. Just ask Beaumont Vance, senior risk manager at Sun Microsystems Inc. Vance has been trying to put a dollar value on operational risks, and he has found a pretty novel solution–courtesy of the National Aeronautics and Space Administration (NASA)–called expert elicitation. At NASA, the process is used to measure Space Shuttle risks; at Sun, Vance is focusing on operational risk, “trying to quantify what in the past has been unquantifiable.”

A couple of PhD statisticians from Sun’s engineering side introduced NASA’s probabilistic calculation to the risk manager. He presents a simple analogy of how expert elicitation works: “If you ask 100 people at a county fair to guesstimate the number of jelly beans in a jar, then take their answers and average them out, the answer converges on reality,” says Vance, who is based in the Denver office of the $11.5 billion IT service, software and hardware company. “It’s pretty amazing.”

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