1. Resolve Mediation Services, Inc.
Commercial Division Training May 27, 2009 / June 3, Risk Analysis for Commercial Mediators
Simeon H. Baum, Esq.
Resolve Mediation Services, Inc.
New York, NY (212)

2. The Higher Math of Risk Analysis

3. Reasons to Try Risk Analysis
Creates feeling of objectivity & sense of legitimacy – not “me”
Neutral, logical, shared structure
Engenders dispassionate approach
Gives feeling of doability
Creates party Buy-In
Addresses/sparks the FUD Factor

4. FUD FACTOR:
FEAR
UNCERTAINTY
DOUBT

5. More Reasons for Risk Analysis
Addresses varying views of probable outcomes
Is funnel for integrating and creating symmetry of information
Gives Agents something to Write Home about
Steadies Communication
Stills Reactive Devaluation

6. (Expected Present Value)
What Is Risk Analysis?
Remember Louis Nizer?
Converting
Probabilities to $#s
(Expected Present Value)

7. Probable Outcomes & Factors
Settle or Litigate
Win or Lose Summary Judgment
Discovery & Evidence
Win or Lose at Trial
Varying Damages
Appeal Risks
Collection Risks
Transaction & Opportunity Costs
Time Value of $ - interest/inflation

8. DEFINITIONS
Decision Node: Decision maker must choose which option to pursue.
Chance Node: Decision maker has no control over the outcome. Lines emanating from the circle denote possible outcomes of an event, each bearing an associated probability (P) of occurrence. P for all branches emanating from a chance node must produce a sum of 1.0 (or 100%)
Terminal Node is the point beyond which no activity is possible. It represents the consequence, payoff, or net value.

9. DEFINITIONS, continued
Expected Value is the mean of the possible outcomes in a situation with each outcome weighted by its likelihood of occurring.
Sensitivity Analysis provides a means of assessing how the results of a decision tree are affected by variations in one or more of the uncertain quantities relevant to the decision.
e.g., likelihood of winning &
Expected Damages

11. Disaggregation
The spirit of decision analysis is divide and conquer: Decompose a complex problem into simpler problems; think straight, paste analyses together with logical glue, get program for action.
Howard Raiffa

12. Tao te Ching Think of the small as large And the few as many
Confront the difficult
while it is still easy;
Accomplish a great task
By a series of small acts

13. Risk Analysis’s Detractors
It overlooks importance of Emotion, Values and Subjectivity (Kierkegaard: Concluding Unscientific Postscript To The Philosophical Fragments, 1846)
BIBO GIGO (bad in bad out)
It is only as good as the information you gather and the assumptions you make
It is a Pseudo Science or at least an Irregular Science

14. Working the #s

15. The Art of Risk Analysis
Gather Information
Set the Right Tone
Develop Trust
Good Timing
Involve the Parties & Counsel
Do not Get Stuck
Consider Caucus/Joint Session
Couple with Transaction Cost Analysis