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Volume 11, Issue 02
The Spectrum of Risk Management in a Technology Company
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ITJ The Spectrum of Risk Management in a Technology Company
Intel Technology Journal - Featuring Intel's Recent Research and Development
The Spectrum of Risk Management in a Technology Company
Volume 11    Issue 02    Published May 16, 2007
ISSN 1535-864X    DOI: 10.1535/itj.1102.04

  Section 12 of 12  
Using Forecasting Markets to Manage Demand Risk
FIVE CATEGORIES OF CONSIDERATIONS FOR DESIGNING INFORMATION AGGREGATION MECHANISMS

Information: What is the result to be forecast, how is it defined, when is it known, and to what precision is it known? What range could the result cover, and what granularity of forecast is material to the business? What level of granularity might participants be able to forecast? What information is provided to participants in advance of the market, during the market, and after the market? Where is the line between providing a baseline to improve inputs and providing an anchor that might undermine accurate information? What types of analyses will the information produced by the market enable, and which business decisions will be informed by that analysis?

Integration: Which business processes are related to the market? What is the timing of key decisions or events that will inform the market or be informed by the market? Which other processes attempt to forecast the same result, and should the market function independently or coordinate with the other processes? Based on business cycles or other processes and workflow, when are participants available or busy?

Inclusion: Who should participate in the market? How many participants are needed to achieve good results? Should participants have local and specific views or more aggregate views? Should groups that demonstrate bias in other forecasts participate, and would they bring the same biases to the market? Can people across wide ranges of time zones participate together, and will participation skew results? Might anyone outside the firm participate?

Interface: How will individuals interact with the market? Will the market be continuous or provide snapshots? Is participation synchronous or asynchronous? What level of anonymity is provided? How do traders convert their knowledge and preferences into data and, ultimately, collective forecasts?

Incentives: What will motivate participants to enter the market, and what will motivate strong performance? How do incentives compare to salaries, awards, or other incentives within the corporation? To what extent are strong performance and bragging rights incentives? Will management support the incentives? Are systems available to pay the incentives out without undue cost? Will those processes scale to large numbers of participants?


  Section 12 of 12  

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