Real-Life Math

As a risk manager, how much you exercise your math know-how depends on the types of risk you deal with. Some will use it more than others. For instance, insurance underwriters and financial analysts who do risk management tend to use math more often than someone who manages the day-to-day risks in public works departments.

"Math is one of the areas that I don't deal a lot with," says Ruth Unks. She is a risk manager. "The risk managers who are getting more and more involved in financial areas require that. In my immediate area, I have to know simple arithmetic, but I don't use it a lot."

However, as many risk managers go about analyzing their organization's existing risks and next steps, they need information. Most of this information consists of statistical data that has to be understood before it can be applied to a risk scenario. Math skills help them do that.

"Math is important because a lot of their work involves analysis, dealing with statistics and demographics," says James Coyle. He is the director of the Public Risk Management Association.

"If you're purchasing insurance, you'll be doing a lot of rate comparisons, that sort of thing. You don't have to be a mathematician, but you have to be able to work with numbers. If you're a good analytical person you'll probably be able to do very well."

You're a risk manager for the Ford Motor Co. You've commissioned a joint risk management study between Ford's safety data analysis engineers and the University of Michigan's Transportation Research Institute. The study looks at why car accidents are the number 1 killer of children in America. It has some surprising findings.

The following statistics come from an actual study commissioned and released by Ford in June 2000:

1. Fourteen- and 15-year-olds spend about 25 percent of their time as passengers with peers behind the wheel.
2. More than 80 percent of 14- and 15-year-olds who were killed were passengers in vehicles with drivers who were too young to be their parents. In fact, 70 percent of them were riding with drivers who were aged 21 or under.
3. Looking even more closely at that group, in 14 percent of peer driver-caused fatal accidents, children between the ages of 12 and 15 were behind the wheel.
4. When it comes to gender, male drivers are likely to be involved in more than 50 percent of the crashes that result in injuries and fatalities to child passengers.
5. Over 20 percent of all fatally injured child passengers were in crashes in which the driver was traveling too fast for conditions or at speeds in excess of posted limits.

Use the above criteria to assess the risks of young passengers being driven by young drivers. Give the risks a rating between 1 and 5, 1 being a minor risk and 5 being an extreme risk. Rate them according to the severity of the above statistics' rated percentages.

Use your results to decide whether Ford should make a public service announcement addressing this particular risk. Risks rated between 1 and 2.5 don't warrant an announcement. Risks between 3.5 and 5 do. Use your judgment when ratings fall in the gray area between 2.5 and 3.5.

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