Please enable JavaScript.
Coggle requires JavaScript to display documents.
Chapter 16: Risk Management - Coggle Diagram
Chapter 16: Risk Management
Risk;
Is an uncertain event or condition which, if it occurs, has a negative effect on a projects objective.
In an effect of uncertainty on objectives
is an advantage(opportunity) or a disadvantage(threat)
Risk management;
the proactive actions taken to id and manage internal and external threats or actions that could negatively impact on the ability of the org to be successful.
Risk management advantages(7);
ACRONYM: SEMI - ICE
Improve org learning;
lessons learnt from previous risk scenarios, with proof of treatment or failure, are useful references prior to the start of new change projects.
Meet objectives;
Proactively managing risk increase the firms likelihood, of attaining its objectives, increasing both performance, and effectiveness
Enhance corporate governance;
improved corpg(Corporate governance), is possible due to effective risk control.
Create a risk management culture;
est'ing an entrenched risk management(RM) process allows for a proactive risk management on all lvls and in all divisions
Enhance risk response decisions;
Improved ability to id and select an appropriate RM response among the options, i.e. removal, transfer, reduction
Improve allocation of resources;
A clear understanding of the risk that faces the org, gives the org direction and how to use resources to mange the risk.
Seize opportunities;
The process of id'ing risk can stimulate thinking and generate opportunities as well as threats
Enterprise risk management;
the process of planning, organising, leading, and controlling the activities of an org to minimise the effects or risk on an orgs capital earnings.
Advantages of continuous risk Management with in orgs will enhance the ability of orgs to:
Seize opportunities
Improve risk response decisions
ID and manage interdepartmental org risks
Align their risk appetite with the orgs strategy
minimise operational crises and losses
4 aspects will influence how any risk will be managed;(basically bare in mind these 4 things can pop-up anytime during the process, the degree varies)
Risk Management process(5);
Anagram;
Arnold Rode Reilley Masterfully Compadre
Risk assessment;
the overall process of risk id/analysis and evaluation.
broken into substages(3);
2.1.
Risk id;
determining what, where, when, how, and why something can happen
2.2.
Risk analysis;
Systemic process to understand the nature of the risk and to evaluate the level of risk.
2.3.
Risk evaluation;
process of comparing the lvl of risk against the set performance criteria.
Risk Id;
Events seen as risks are recognized and described.
The obj of risk id is to id the risk to the business and id stage
Risk register is typically the main output result of the risk id stage
Risk analysis;
the objective is to assess the risk and the opportunities to the org in terms of their probability(likeliness) and impact
in the process of risk analysis, a probability impact matrix should be created.
Risk evaluation;
Get an understanding of indie risks and opportunities so that we can see the total impact and their true net effect.
Risk and opportunities comparisons;
Decision trees
Quantitative results
Scenario analysis/modelling
Prob trees
Risk treatment
The key tasks is to use all the preceding efforts to create a response and action plans to address the risks and opportunities id'ed in order to achieve the business or project obj.
The objective is to plan specific management response to the threats and opportunities id'ed during the RM process
Risk appetite is also referred to as risk preference and risk tolerance
Analyse and est the context;
gets a better understanding of the background of the org as well as the current situation that the org is facing.
Get an understanding of the specific business activity, process, or project, being investigated.
The objective of stage one is to understand the business processes and what the current status of the org is.
Monitor and review;
React to early warning indicators to warn managers of the need to make RM interventions
Register changes in the details of risk opportunities already captured on the risk register.
Record emerging risks and opportunities, lesson learned and changes in the internal and external context.
5. Communication and consultation;
The last stage refers to the dialogue that takes place across all the risk management stages to support their effective implementation.
The objective is to develop plans for communication and consultation at the outset of the RM process
internal and external communication mechanisms are est'ed and communicated
The risk management culture of the org;
the importance of a risk leads into the risk culture which will either enhance or hinder risk management.
The resources available for managing risk;
the available resources, such as time, capital and people, will affect the risk process in terms of town.
The risk management restrictions;
Est'ing the focus that is the parameters of the risk investigated and what ill be managed could be influenced by multi aspects.
What RM plan entails;
Risk id process could, be affected if the roles and responsibilities of participants are not clearly defined, the purpose of the RM process is not clearly stated, org objectives are not id'ed and communicated.
Internal sources of enterprise risk(6);
Failure that occurs within the org that causes risks or faults in the RM process
Financial risks;
the exposure to adverse events that erode profitability and can cause total biz collapse
Source risk of fin risk;
interest rate
inflation
credit risk
Currency risk
Ethical risk;
Exposure to events that may result in criminal prosecution, lawsuits, or erosion of rep.
As changes occur, society continuously develops opinions on what is perceived to be right and wrong, and acceptable or unacceptable.
Source of Ethical risk;
Bribery
False accounting
Money laundering
Tax evasion
Exploitation
Counterfeit goods
Invasion of privacy
Why should we manage ethical risk?
customer loyalty
reduced insurance premiums
Business partner choices
Sustained long-term growth due to goodwill and ethical conduct
Positive medial exposure and coverage
strong employee performance and ability to attract quality employees
Operational risk;
Operational risk is the risk of loss resulting from inadequate or failed internal processes, policies, practices, people or sys
Source of operation risk
Biz or strat risk
Crime risk
IT risks
Reputational risk
Project risk;
risk relating to the delivery of a product or service, usually within the constraints of time, cost, quality, and/or scope
Sources of project risk;
Business environment within which the project is conducted
The host industry within which the project is conducted
Sponsor org and to what extent they are geared or prepared
The user requirements
Projects brief indicating the specs of the project
The design, specs and layouts relevant to the specific project
Technological risk;
the events that could lead to insufficient, inappropriate, or mismanagement of investment in tech in terms of manufacturing and services processes, product design, and/or information management.
Source of technology risk;
Inadequate investment in technology
Tech governance, compliance
Inadequate security and protection
Availability of IT in times of natural disasters
Health and safety risk;
Health and safety risk can be described as the risk of injury or ill health to and employee or the fatality of an employees.
sources of health and safety risk;
the need of the org to meet government policies and legislation criteria
actions to prevent reputation damage
Criminal prosecution or civil lawsuits
Loss of market share, costumers, suppliers, shareholders, funding, partners.
increase staff turnover and associated recruitment costs due to health and safety issues.
External sources of enterprise risk(6);
Environmental Risk;
the real or potential threat of adverse effects on living organisms and the environment by emission, discharges, resource depletion, abuse, or any other form of negative impact as a result of an orgs activities.
Sources of environmental risk;
Pollution
Increased environ regulation and higher operational costs
Prosecution arising from the lack of compliance with rules set by a regulatory body
reputational risk
Why should we manage environmental risk?
It encourages the examination of business continuity issues stemming from possible climate change events.
stimulates closer examination of the risks of adverse environ incidents and response actions should they occur
it reduces exposure to prosecution
it increase competitive advantage where customer buying preferences favour business with a better environ performance
Econ risk;
The influence of national macroeconomics, such as intra, productivity, growth rates, gross domestic product, inflation, and unemployment, on the performance
Sources of econ risk;
a fall in demand
Government policies
Movement in property price
Exchange rates creating currency risk and intra flux
Legal Risk;
The risk of failing to operate within the law, whether it is relating to regulatory and contractual matter and/or relating to non-contractual rights and obligations.
Source of legal risk;
Breach of legislation
Inaccurate listing of info
Breach of copyright
Loss of business
Prosecution for breach of law
Market risk;
the exposure to potential loss arising from diminishing sales or margins due to changes in market conditions, outside of control of the business.
Sources of market risk;
Political
Cultural
Demographic
Physical and natural
Economic
Social risk;
stems from changes in society, which creates changes in demand, opens new market opportunities, or alters business responsiveness to demand as a consequence of the characteristic of the work force.
Source of social risk;
Poor standard of edu of new recruits
linguistics as a barrier to trade
Growing obesity
high pregnancy rate among teenagers
Why should we manage social risk?
it allows the org and its employees to understand the impact of the risks to the org and its employees in terms of crime.
It helps to id the risks associated with employment, especially the lvl of edu required of new recruits, as well as a proactive way for dealing with SA's shortcomings
The org can understand the ongoing changes in socio-econ groups and the changes they make to the market sector and to future product markets
Political risk;
uncertainty stemming from the exercise of power by governmental role players, and the actions of non-governmental groups.
Source of politics
Macro-politics
Nationalism
Civil war
expropriation
Corruption within national and local governments and so on.
Micro-politics
industry specific tax
tariffs
quotas