Understanding and managing risks properly has become a key challenge and source of success for corporations, banks, and government organizations. The challenge is not confined to understanding underlying risks and tools to deal with them. It also involves overcoming organizational hurdles and conflicting incentives within the organization. Incomplete risk analysis and distorted incentives in the implementation process can have devastating and long-lasting effects for corporations and society.

The specialization takes a holistic and applied perspective. It draws general lessons from real cases and provides students with tools to assess and implement risk management strategies that create value and are sustainable. Topics include, but are not limited to:

Applied Risk Management I (Henle) 

• US COVID vaccine procurement strategy versus that of the European Union: what went wrong and lessons for corporate risk management.
• Monte Carlo simulation: a simple and flexible tool to model risk. 
• Bringing management on board and designing a coherent risk management strategy: getting the commitment and data that are essential for effective risk management. 
• Risk management workshop simulation.
• Understanding the challenges of chaotic systems and endogenous risk.
• The financial crisis of 2008-2009: the limits of modeling risk.

Applied Risk Management II (Laux) 

• Operational risk management.
• The role of governance problems in risk management.
• Bank failures and the financial crisis of 2007-2009. 
• The role of information and incentive problems in risk transfer and risk allocation. 
• Corporate structure and finance. 

We address these topics by looking at causes of operational risk, securitization and its role in the financial crisis, benefits and challenges of project financing, case studies, and lessons from academic papers.

In Course II, we focus on economic reasoning and understanding economic problems. We do not model or quantify risk, and we do not use exercises comparable to those in Risk Management.

Applied Risk Management is designed to help you analyze complex problems and make well-reasoned decisions in settings where there is not always one clearly correct answer. 

After completion of the course, students will be able to:

• Identify organizational challenges of risk management, including situations in which conflicting objectives compromise risk management.
• Understand strategies and tools to transform the concepts of risk management into real outcomes and decisions by getting the support and involvement of senior management.
• Recognize the dangers of deeply rooted misconceptions about handling future events and the danger of falling into the trap of the "perceived obvious" ("Hausverstand").
• Understand that the cornerstone of a successful risk management strategy is a clear framework of risk policy.
• Understand the importance of the concept of comparative advantage in risk bearing.

Real-word problems are complex and the "solution"; is often not simply right or wrong. "Solving the exercises" involves a comprehensive analysis and identification of key problems. After a careful analysis of the specific case and problems at hand, students have to develop a coherent line of reasoning.

While most exercises do not have one predetermined solution, there are still better and worse analyses. 

Students must be willing to actively participate in their groups, be interested in tackling challenging questions, and be comfortable with a learning approach that does not involve “solving a set of exercises to prepare for the exam.”

Assessment is continuous with graded quizzes and exercises that take place throughout the course. Thus, regular attendance and preparation are essential, alongside active participation, discussion, and constructive interaction.

Note: We do not use exercises of the type that you know from the course Risk Management. Moreover, both courses follow a no devices policy (no computers, tablets, phones in class) unless explicitly allowed in specific sessions.