Intelligent financial decision model of natural disasters risk control

Abstract

This paper describes how risk-based risk control allocation model works. We begin by discussing the economic rational for allocating risk control in a diversified organization like enterprises. The direct and indirect losses caused by the simulated disasters can be estimated using the engineering and financial analysis model. Basing on the model, we can generate exceeding probability (EP) curve and then calculate how much loss will be ceased or transferred to other entities, if somehow spending budgets on risk control actions. Results from the proposed formulations are compared in case studies. The model attempts to apply risk based budget guidelines to risk reduction measurement with a portfolio-based risk framework. © Springer-Verlag Berlin Heidelberg 2007.