Why it is useful the delphi technique helps reduce

systematic and iterative survey of opinions drawn from a panel of experts.
Why it is useful
§ The Delphi Technique helps reduce bias, encourage dialogue between
experts and speeds consensus, and reduces the risk that any one person
from having undue influence on the opinion of the group.
How it works
§ Experts answer questionnaires in two or more rounds. After each round, a
facilitator provides an anonymised summary of the experts' forecasts from
the previous round as well as the reasons they provided for their
judgments. Thus, experts are encouraged to revise their earlier answers
in light of the replies of other members of their panel.
§ The process is stopped after a predefined stop criterion (e.g. number of
rounds, achievement of consensus, stability of results) and the mean or
median scores of the final rounds determine the results.

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Cash Flow at Risk (CFaR) defined (refer COSO)
§ Cash Flow at Risk is a quantitative risk measure built on a causal
model where specific risk factors drive future uncertainty of key
financial cash flow or earnings objectives.
§ Each risk factor is modelled in detail and incorporated into an overall
model of the firm’s cash flows or earnings.
§ Unlike simple budgeting or extrapolating past experiences, CFaR
gives insight into the potential variability of future cash flows and
earnings.
§ CFaR answers the question: For a given likelihood how large could
the negative consequence be (ie. How low can cash flow and
earnings fall?)
§ A CFaR statistic has three components: a time period (usually one or
more multiple years), a confidence level and a loss amount.

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Used by firms with many material financial risks where the drivers of
uncertainty can be modelled statistically. Examples include:
§ Financial institutions
§ Energy wholesaling companies
§ Airlines
§ Infrastructure projects (eg. Toll roads)
§ Mining and commodities
“Several airlines have built CFaR models reflecting fuel costs, demand, and
—in some cases—currency, to measure not only the effectiveness of their
hedging positions but also to trade off the financial impact of changes to fuel
hedging strategy, adjusting fuel-price pass-through in pricing, and right-
sizing the amount of extra cash to keep on hand, all to optimize an overall
financial-risk-management strategy. “
Who uses CFaR?
Source: McKinsey Working Papers on Risk, Number 51

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Technical definition of economic capital
§ EC is the difference between the expected value and
worst case value, of earnings or asset values, to a given
level of confidence.
§ EC measures the potential extent of underperformance,
relative to expected, due to uncertainties.
§ It supports ERM and so is defined from the shareholder’s
perspective, hence the use of the term “economic”.
– A focus on accounting capital would only be concerned only with
negative earnings below zero (absolute loss).