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Activity Number:
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397
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Type:
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Invited
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Date/Time:
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Wednesday, August 5, 2009 : 8:30 AM to 10:20 AM
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Sponsor:
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Section on Statistics in Defense and National Security
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| Abstract - #302910 |
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Title:
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What's Wrong with Hazard-Ranking Systems?
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Author(s):
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Louis A. Cox*+
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Companies:
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Cox Associates
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Address:
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503 Franklin St , Denver , CO, 80218,
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Keywords:
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hazard-ranking systems ; risk management ; priority scoring and ranking ; portfolio optimization
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Abstract:
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Two commonly recommended principles for allocating risk management resources effectively are: (1) Select a subset to maximize risk-reduction benefits; and (2) Assign priorities to risk-reducing opportunities and then select activities from the top of the priority list down until no more can be afforded. When different activities create uncertain but correlated risk reductions, as is often the case in practice, then these principles are inconsistent: priority scoring and ranking fails to maximize risk-reduction benefits. Real-world risk priority scoring do not exploit correlations among risk-reducing opportunities or optimally diversify risk-reducing investments. As a result, they generally make sub-optimal risk management recommendations. Applying portfolio optimization methods can achieve greater risk-reduction value for resources spent.
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- The address information is for the authors that have a + after their name.
- Authors who are presenting talks have a * after their name.
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