Portfolio optimization, risk management, and operations

As we see every day -- whether in business or in our personal and professional lives -- decision-making and its consequences, are fraught with risk. The risks may take on many forms from political risk to exchange rate risk and price volatility risk to environmental risk and disruption-based risk, as in disasters due to natural causes, accidents, or planned attacks, to name just a few. The world now is reeling from the BP Deep Horizon oil rig blowout, the most graphic, high impact recent environmental and economic disaster.

Risk management, hence, has evolved as a topic in its own right and is necessarily interdisciplinary because of its vital components, be they social, engineering-based, financial, natural, operational, etc.

In terms of business operations, firms may need to decide whether to outsource various economic activities associated with their supply chains or to continue business as usual. They may need to assess whether to merge or to acquire another firm, which may lie thousands of miles away. They may have to identify new partnerships or to shed older ones; to promote and hire new executives, or let others go. Should one build a new manufacturing plant and where? Should one bring to production a new product? Should one expand into new global markets? All such decisions must have embedded within them some measure of risk since we live in uncertain and very dynamic times.

The areas of finance and operations management (propitiously also the name of my department at the Isenberg School of Management at UMass Amherst) can bring much to both research in and the practice of risk management.

Last year I had the honor and pleasure of instructing a course on portfolio optimization in the Executive Education program at Harvard University's Graduate School of Design. The course covered the fundamentals of portfolio optimization and risk management and also discussed the importance of a network and systems perspective to financial management.

My course lecture notes can be accessed here.

Today we are conducting research on global outsourcing and risk management as well as on supply chain network design and risk. Our recent studies on various supply chain network as well as financial network topics can be accessed here.

Without appropriate risk management and risk mitigation strategies our already fragile and vulnerable networks may not be sustainable.

Teaching at Harvard University in Executive Education

I am getting ready to teach my course next week at Harvard University. I have been appointed an Instructor at the Office of Executive Education at Harvard and will be using materials from my latest book, "Fragile Networks: Identifying Vulnerabilities and Synergies in an Uncertain World," as well as from my "Financial Networks: Statics and Dynamics" book. The former book was co-authored with Dr. Qiang "Patrick" Qiang and the latter with Dr. Stavros Siokos, both of whom were my doctoral students at UMass Amherst and are Associates of the Virtual Center for Supernetworks that I direct.

The Harvard course that I will be teaching is part of the Advanced Management Development Program and in the course there will be students from numerous countries, including: China, Nigeria, Lebanon, India, Australia, Spain, Morocco, Saudi Arabia, Argentina, and even from the US! This should be an incredible teaching and educational experience.

I will be returning to my second "alma mater," since I was a Fellow of the Radcliffe Institute for Advanced Study at Harvard in 2005-2006 and am considered (on top of my four Brown University degrees) to be a Harvard alum.

Speaking of returning to own's alma mater, this weekend we will be helping to host one of my former students from Colombia who received his MBA from UMass Amherst and who will be visiting us with his family.