Tag Archives: dubai

Flying Through Tubes at 760 MPH

Picture the commute of the future: You live in Palo Alto, CA, but you work 350 miles away in Los Angeles. After your morning latte, you click on a smartphone app to summon your digital chauffeur. Three minutes later, an autonomous car shows up at your front door to drive you to a Hyperloop station in downtown Mountain View, where a pod transports you through a vacuum tube at 760 mph. When you reach the Pasadena station, another self-driving car awaits to take you to your office. You reach your destination in less than an hour.

That is the type of scenario that Hyperloop Transportation Technologies (HTT) chief executive Dirk Ahlborn laid out for me as we were preparing to speak together on a panel at the Knowledge Summit in Dubai on Dec. 5.  He was not talking about something that would happen in the next century; he expects the first of these systems to be operational in the United Arab Emirates by 2020. The Abu Dhabi government has just announced that it has been working with his company to connect Abu Dhabi and Al Ain, two UAE cities separated by 105 miles, using the Hyperloop system.

See also: The Real Story on Transportation  

A proposal for this mode of transportation came from Elon Musk in August 2013, in a paper titled “Hyperloop Alpha.” Musk envisaged a mass transit system where trains travel as fast as 760 mph in pressurized capsule pods. These would ride on an air cushion in steel tubes and be driven by linear induction motors and air compressors. He claimed that the system would be safer, faster and cheaper than trains, cars boats and supersonic planes — for at least 900 miles — and he said it would be resistant to earthquakes and would generate more energy through its solar panels than it would use.

Straight out of science fiction it may be, but two start-ups took up Musk’s challenge to develop the technology: HTT and Hyperloop One. These companies have raised more than $100 million each and say that they will have operational systems in three to four years and that they have governments backing them. Hyperloop One demonstrated elements of the technology in the Las Vegas desert in May 2016.  The sheiks I spoke with in Dubai were most excited about HTT’s system.

Even if the Hyperloop technology doesn’t pan out, the digital chauffeurs surely are coming. Self-driving cars such as the Tesla that I drive can already take control of the wheel on highways and are able to monitor traffic around them better than humans can — because their sensors enable them to see in 360 degrees and communicate with each other to negotiate rights of way.

By 2020, self-driving cars will have progressed so far that they can drive safely at speeds as fast as 200 mph in their own partitioned lanes on highways. In these circumstances, the commute to Los Angeles from San Francisco would take only an hour and a half — without the need to catch a connection to a supersonic pod. From Abu Dhabi to Al Ain or to Dubai could take the car 30 to 40 minutes, door to door. In other words, Elon Musk’s self-driving cars and HTT’s short-haul Hyperloops may be competing with each other. I’m one of those who would prefer the convenience of having their car come with them so that they can keep extra stuff in the back and be working uninterrupted on the commute. In any case, for longer journeys, say from New York or San Francisco to Miami, catching a Hyperloop will make more sense than riding in the self-driving car.

The point, though, is that we are on the verge of a revolution in transportation.  For decades — actually, centuries — we have been dependent on locomotives and, more recently, airplanes to take us long distances. The technologies have hardly advanced. The entire industry is about to be disrupted. Many of us will choose to take the shared cars and Hyperloops; others will own their own cars. But we will take fewer rides in trains and planes.

That is why new rail-based transportation systems, such as the one California has long been debating, are not sensible investments. By the time they are complete, our modes of mass transportation will have changed. The California project aims to move 20 to 24 million passengers a year from downtown L.A. to downtown San Francisco, through California’s Central Valley, in 2 hours, 40 minutes. It is projected to cost an estimated $64 billion when completed by about 2030. By then, we will be debating whether human beings should be allowed to drive cars, and public rail systems will be facing bankruptcy because of cheaper and better alternatives.

See also: Of Robots, Self-Driving Cars and Insurance  

The wise investment to make will be in accelerating adoption of self-driving cars and in reserving lanes for them, and in building energy-efficient long-distance transportation systems that do not consume even more time, money and arable land than we have lost already. For distances in the hundreds or thousands of miles, we’d do well to explore Hyperloops and other environmentally sensitive modes of mass transportation. They may be far more cost-effective than laying new railways.

Can Risk Management Even Be Effective?

Lately, everyone from government agencies to regulators to corporate board members seem to be talking about the need for more effective risk management. The challenging part is that, despite the guidance provided in ISO 31000:2009, the concept of risk management effectiveness remains vague. This article attempts to summarize the basic components of effective risk management, which should help risk managers to respond to the challenges set by regulators and shareholders.

The team at Institute for Strategic Risk Analysis in Decision Making (ISAR) and www.risk-academy.ru has been studying risk management for more than 15 years, and we firmly believe that effective risk management is only possible when all four criteria below are met. Each of these criteria is based on ISO31000:2009, the most widely used risk management standard in the world (translated and officially adopted in 44 of the 50 biggest countries based on the GDP).

1. Integrating Risk Into Decision Making

One of the most important tests of true risk management effectiveness is the level of risk management integration into decision making. ISAR research shows that companies achieve long-term advantage if they are capable of systematically integrating risk management into planning and budgeting decisions, investment decisions, core operational business processes and key supporting functions. Just consider an example of a large investment fund, which makes investment decisions only after an independent risks analysis and does simulations to test the effect of uncertainty on key project assumptions and forecasts. Another example is a large airline, which makes strategic decisions based on several quality alternatives with a risk assessment performed for each alternative.

For us it’s very important that risks are taken into account when investment decisions are made. That’s why risk assessments are mandatory for all investment decisions. Risks are identified and evaluated by both the project team and the back-office departments, including legal, finance, scientists, strategy and others. This ensures a more objective and independent risk analysis when making investment decisions.

–Konstantin Dozhdikov, Head of Risk, RUSNANO

 2. Strong Risk Management Culture

Human psychology and the ability of business managers to make decisions in situations of great uncertainty have a huge impact on risk management effectiveness. Nobel laureates D. Kahneman and A. Tversky, have conducted some exceptional research in the field of risk perception, showing that most people, consciously or subconsciously, choose to be ignorant to risks. Robust risk management culture is therefore fundamental to effective risk management. Take for example a large petrochemical company, which used online and face-to-face training to raise risk management awareness and competencies across all staff levels. The company also allocated resources to integrating risk management principles into the overall company culture. Another example is a government agency, which documented transparent discussion and sharing information about risks as one of the corporate values, which were later communicated to all employees.

See also: Risk Management, in Plain English

Training is one of the most important factors in the development of a risk management culture. Risk management can become an effective tool as soon as every employee understands what is it and how it applies to their personal area of responsibility. There are many different kinds of risk management training. It could be risk induction training offered to all new employees. Induction training should include a short explanation of the risks that might arise, information about a useful tool risk management and how to use it when making day-to-day business decisions. It is also useful to conduct separate specialized risk management training for department heads and key managers in order to help them integrate risk analysis into key business processes. The main thing is to remember that training is not supposed to be a one-time measure and, on the contrary, should be offered on a regular basis. Training sessions can be led by your company’s own risk manager or an external party, but either way the trainers must possess relevant competencies and qualifications.

–Lubov Frolova, Head of Risk , Tekhnodinamika

3. Disclosing Risk Information

Another criterion for effective risk management is willingness and ability of an organization to document and disclose risk-related information both internally and externally. A mature company not only documents the results of risk analysis in the internal decision making processes but also discloses information about risks and their mitigation to relevant stakeholders, where appropriate, in external reporting or on the company website. Because actual risk information may be sensitive and contain commercial secrets, the focus of disclosure should not be  on the risks themselves but rather on risk management framework, executive commitment to managing risks and culture of the organization. Many organizations tend to treat this formally, often copying and pasting risk management information in external reporting from year to year without any update.

Remember that disclosure of risk management information allows companies to both make and save money. For example, the insurance market reacts positively to a company’s ability to disclose information about the effectiveness of its risk management and control environment, offering a reduction in insurance premiums. Banks and investors also see risk disclosure in a positive light, allowing companies to lower their financing costs.

One large mobile network operator takes risk reporting particularly seriously. Its approach changed after an IPO. To this day, risk reporting as part of the annual report is not just a recount of the typical risks within their industry sector, but a reflection of key risk management changes and achievements over the last period. Risk reporting is composed of two parts: 1) A general description of events linked to risk management within the company; and 2) A description of key risks facing the company over the year. In the first part, risk managers give a detailed description of significant risk management events that occurred within the company that year. For example, there could be a description of how closely the company is aligned with the ISO 31000:2009 principles, or how the company has strengthened its risk culture. The second part describes common risk categories facing the company. This should point out the typical risks in the industry sector as well as the most significant risks identified over the past year. Additionally, the description of each risk should include the status of mitigation actions taken to manage the risk, their effectiveness and the anticipatory measures that the company intends to take in the future.

 4. Continuously Improving Risk Management

The final criterion for effective risk management has to do with the continuous improvement of the risk management framework and the risk team itself. One investment fund was able to do this with the help of regular assessment of the quality and timeliness of its risk analysis, annual risk management culture assessments and periodic review of risk management team competencies. For example, professional risk management certification helps to boost risk team competencies. One of the reasons behind the need for constant risk management improvement is rapid development of risk management discipline. The ISO 31000:2009 standard is currently being reviewed by more than 200 specialists from 30 different countries, including experts from Russia and members of ISAR. Some of the suggestions for the new version of the standard include the greater need for integration of risk management into business activities, including decision making, and the need to explicitly take into account human and cultural factors. These changes could have a significant impact on many modern non-financial organizations, raising questions about their risk management effectiveness.

See also: Risk Management: Off the Rails?  
Risk management, just like any other element of corporate governance, must be integrated into the overall management system of the organization. The ISO 31000:2009 international standard explicitly talks about the need for risk management to be adaptive, dynamic and iterative. As organizational risk maturity improves, so will the tools used by the organization to manage risks in decision making. Professional risk managers should not only develop risk management processes for the organizations but also improve their own risk management competencies.

As I am writing this, work is being undertaken on the update of both of the most widely adopted risk management standards (ISO 31000:2009 and COSO:ERM 2004). New versions are expected to be available in 2017 and promise to revolutionize our current understanding of risk management, not necessarily in a positive way. My experience shows that participating in international conferences, training sessions and certification programs constitutes a good way for risk managers to keep themselves in top professional shape.

I hope I will see you at the G31000 conference in Dubai on Oct. 12-13, 2016:www.g31000conference2016.org, where I will be presenting on the topic of risk management maturity.

We recommend executives and risk managers evaluate the current level of risk management maturity using the criteria for effective risk management presented in this article. If at least one of the puzzle pieces is missing, it is probably a bit premature to talk about effective risk management.

ERM Alive and Well in Middle East

Having returned from a week in Dubai, where I co-chaired the 4th Annual Middle East and North African ERM Conference and led a two-day workshop on risk and strategy, I am pleased to report that ERM is alive and well half-way around the world. This reinforces my similar experience at the same forum (2nd annual) in 2012. While there may be a perception of free-flowing money and excess in this region, it is clear that key companies in many industries, including finance, energy and healthcare, face most of the same challenges in driving effective risk management strategies and programs as many of the companies in the West. Even though many risk leaders in the Middle East gained their educational backgrounds in Western institutions, where in many cases ERM is still a suspect discipline, many have nevertheless gained significant traction with advanced risk management strategies in their companies.

An interesting angle was revealed at the MENA conference that raises challenging questions for many of these practitioners. It emerged first as an informal, anecdotal comment about the challenge of raising the profile and effectiveness of risk management functions where there was little or no tolerance for risk. While most risk professionals face this challenge at one point or another in their careers, it appears more widespread in this region. The question is: why, and how to do you manage through this dilemma?

First, recognize that all organizations have a risk attitude that ranges from extreme risk aversion to a radically risk-seeking culture — you have a risk culture by default, if you don’t actively design and implement the risk culture you desire. Most often, the actual risk attitude plays itself out in risk-taking behaviors that form the basis for a risk-appetite framework and strategy. Within the context of a risk culture, which is defined primarily by the risk-taking behaviors of employees, every person has a risk attitude and appetite for risk.

The collection of these appetites and associated risk-taking behaviors can lead to what the MENA region seems to reflect, namely little or no tolerance for certain risks. That risk culture will frequently lead to performance issues or product/service pricing challenges that affect competitiveness and reputation. While it is appropriate to avoid certain risks, doing so is generally a bad choice when growth through innovation is desired; risk-taking comes with that strategy.

So attendees at MENA and others who wrestle with risk aversion should realize that this is incompatible with  long-term success in a competitive environment. As a result, they should commit to developing a consensus for a risk culture that aligns with an appetite for risk that is consistent with balanced or prudent risk taking.