Just before the Labor Day weekend, business and academia came together for a roundtable at the University of Miami School of Business Administration, “featuring presentations that highlighted various approaches to the discipline of risk management.” We were delighted to read about a roundtable of this sort bridging business and academics because we think such collaborative efforts are important, but we also have an important solution to a number of risk management problems. So we were especially delighted that after a clear statement of problems of risk, an especially incisive member of the faculty introduced the concept of prediction markets to the group.

Here are Brian Rice and Henry Pujol, a pair of executives from Royal Caribbean Cruises, explaining the risk scenario:

Brian Rice, executive vice president and CFO of Royal Caribbean Cruises and a member of the School’s Board of Overseers, spearheaded iniatives to develop the roundtable and kicked it off by explaining the importance of risk management in today’s business culture. He pointed to the familiar crises Toyota and BP faced this year, and stressed how corporations are charged with preparing for the inevitable.

“Risk is a big part of our culture. It’s something we’re very focused on at Royal Caribbean,” Rice said. Henry Pujol, the company’s principal accounting officer and a member of the School’s Accounting Advisory Board, explained the cruise line’s top-down approach to risk management in the first presentation. Royal Caribbean has moved from a once-a-year risk management process to an around-the-clock audit.

“Some risks are easy to identify, like the price of fuel,” Pujol said. “Others are more difficult to recognize. The biggest challenge is the unknown. We’ve learned that we may not be able to prevent every risk, but we can react so there is not a panic moment. We prepare ourselves for the unexpected using what-if scenarios.”

And here’s David Kelly, an associate professor of economics, on the value of prediction markets:

“Prediction markets give us a very low-cost way to measure risk precisely and continuously,” Kelly said. “In most cases, it’s more accurate than expert opinions and surveys.”

We’ve already helped customers experience profound success managing risk in the enterprise, and we invite you to explore examples of our customer success.

Maybe, in addition to our world-renowned Chief Scientist Robin Hanson, we need to add a Chief Economist…