Analyzing the effects of risks and controls in business processes

Despite its growing maturity, simulation is still regarded by some as being complicated and impractical from a management perspective, even through the downfalls in static analysis of risk positions pertaining to business processes, projects, insurances or trading are well documented. Simulation is still perceived by some as an approach which involves too much data, too much expertise, and specialist skill sets to implement.

However the reality is somewhat different and this mindset is in stark contrast to the results reported by those who have leveraged simulation. Simulation usage has grown from below 10% of process-related projects to over 35% according to Gartner. And simulation based on real data has grown from one or two percent to over 10%. In a world where business models and constraints are changing faster than ever and investments become higher and higher, simulation can provide a means of mitigating against disaster and achieving high-margin objectives.

In fact simulation is now available as part of business process management software and is easy to use by anyone in a business context. Investment in the technology is very low compared with the savings which can be achieved. Generally speaking, it is fairly easy to save €1 million by reducing risk event occurrences and optimizing process performance in parallel. ROI on simulation projects is a given in most cases.

This white paper is intended to introduce the use of business process simulation with special focus on risk events and control activities. With the help of a small sample process the authors demonstrate how the effects of risk occurrence as well as the effects of controls introduced to counter the risks can be determined by conducting a simulation study with ARIS Business Simulator. In particular modeling and configuration of risks and controls in a process model, the simulation of the process model and the interpretation of the simulation results will be discussed.

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