Risk prioritisation (RP): a decision making tool for risk management

This thesis develops a decision making tool for risk management. The tool Risk Prioritisation (RP) exploits the Analytic Hierarchy Process (AHP). AHP has been widely applied to variety of complex problems. This thesis brings AHP to a new area of application: risk management. The contributions of this thesis are twofold. The first part is the design and development of RP. To use the AHP for risk management, several modifications have to be made. RP is a modified version of the AHP. Developing RP contributes to the development and application of the AHP to risk management. The second part of the contribution is the application of RP to risk management, which is a two-step procedure. First, RP is applied to risk management problems. Second, using the problems as a medium, risk managers evaluate RP practical usability. Risk managers' feedbacks are used to identify how RP is useful for risk management, how to use RP for risk management and what risk managers require in order to use RP effectively. Analysis of the feedback is used to improve RP's practical usability for risk management decision making. RP structures and simplifies complex risk management problems. Complex problems do not necessarily need a complex solution; rather, they need to be disentangled and simplified to find solutions. RP disentangles a complex risk management problem by structuring it in a hierarchy and simplifying it by breaking it down into sub-problems. To structure and simplify a problem, risk managers need to understand it, gather facts and factors relevant to the problem, and justify the rationales for including the factors in the hierarchy. Hierarchies systematically structure the influences, connections and interactions of a problem. To break down a problem, risk managers must exercise reductive thinking and logical analysis. To investigate whether RP has something to offer to risk management, it is applied to the following risk management problems: (i) prioritising risks faced by an insurance company and (ii) determining an insurance company's line of business that has the highest risks. These problems are then presented to risk managers. The purpose is to bring RP to the practical risk management setting and obtain risk managers' feedback on RP practical usability. The feedback is used to modify, refine and improve RP, to understand RP from risk managers' perspectives, and to increase knowledge regarding the applications of RP to risk management. Decision making is an important component of risk management. A reliable and systematic decision-making process is as important as a reliable and systematic risk management process. RP is a systematic, practical, reliable and easy-to-use decision-making tool for risk management. It improves risk managers' understanding of a problem through decomposing and structuring the problem in a hierarchy. RP enables risk managers to simplify the problem, yet maintain the complexity of the problem. RP's logical and easy to use decision making process enables risk managers to understand how each step guides them towards achieving the decision goal. Furthermore, a practical and easy to use decision making process facilitates communication between risk managers, top management and relevant stakeholders.