Risk management modeling software

A risk score tells decision-makers when to act and where the damage would land. ISO 31000 recommends a risk management plan (RMP) with four steps: identify the risks, assess how likely and how damaging each one is, treat them, and review and monitor them, often with Key Risk Indicators (KRIs) as thresholds. The same steps drive scenario work such as policy impact assessment.

To show the RMP outside of a business, this study models the gameshow Deal or No Deal. The game has 26 cases holding sums from 1 dollar to 1 million dollars. The contestant keeps one case, opens the others one at a time, and is offered money to sell the case back at each round (“Deal or No Deal?”), and the contestant’s first action is to claim one case without revealing it. Refuse every deal and you keep what is in your case.

• Identify: everyone leaves with at least 1 dollar, so the risk is a prize below the average of $131,477. Accepting an offer under $100K counts as a losing move.
• Assess: the risk score of refusing a deal is the probability of a worse offer next round times the severity of the loss. Severity rises when the offer is below two thresholds, 130K and 400K dollars.
• Treat: above a risk score of about 70%, refuse the deal, because a better one is likely to follow. Below 50%, taking the banker’s offer becomes the recommended, more secure choice.
• Review: a Play of the model is a safe environment where damaging scenarios have no adverse effects, so you can review the plan every time you press Play. The chart tracks the evolution of the risk score, the banker’s offers and the final prizes awarded, and working through the diagram lets you work out mathematically which path secures larger prizes.

In the diagram, a Briefcase Board starts with 26 cases and a Prize Pool holds the money still in play. Each round the player opens cases, which removes prizes from the pool, and the banker offers a share of the average prize left. A Deal Decision compares the offer with the player’s risk threshold: above it, the player takes the deal and the payout lands in the Player Wallet; otherwise the next round starts.

Four Levers set the plan: Banker Offer Rate (the share of the average prize offered), Deal Threshold (the offer in dollars that the player accepts), Starting Prize Pool and Cases opened per round. Press Play and watch the offer climb until it crosses the threshold, then move a Lever and Play again to see how a bolder or safer plan changes the final payout.