Risk Management Fundamentals

• The following are study notes on Risk Management

Key Steps in Risk Assessment

• Assessing risk and control types is a key step
• Identification of risks is a key step
• Measurement of risks is a key step
• Reviewing risks is a key step

High-Level Risk Register Creation

• Identifying risks is required to create a high-level risk register
• A project sponsor is typically interested in seeing the high-level risk register
• Robert is a project manager for a significantly important project

Risk Assessment

• The primary aspect involves the identification of relevant risks
• It is not a good idea to include people with an limited knowledge of the program or process that will be analyzed when identifying risks
• The key aspect is not necessarily the identification of opportunity risks
• Risk managers cannot eliminate all risks

Capacity Risk

• Capacity risk refers to the risk that is not failing to maintain beneficial relationships with customers
• It also refers to the risk that is generating excessive amounts of waste
• It also refers to the fact that an organization has an inability to produce as many units as required
• It also refers to the risk of delivering ordered goods or services past the promised date

Internal Constraints in Risk Assessment

• GDP of the Philippines is an external constraint, not an internal one
• Equipment is considered an internal constraint
• Managers are considered an internal constraint
• Regulations are considered an internal constraint

Measurement of Risks Overview

• Measurement should be driven by facts only
• Measurement should be essential right after risk identification
• The measurement process can be either qualitative or quantitative
• Subjective measures are not driven by the participants’ experiences

Expanded Impact Rating (Negligible - Very Low)

• Expanded impact rating (negligible-very low) requires insignificant personal support
• Minor impact on environment with no lasting effects
• Not limited impact on the local environment with short or long term effects
• People are not displaced

Risk Terminology

• A hazard has the potential to cause harm to people, property, or the environment

External Organization

• Politics is external
• Regulators are external
• Social factors are external

Internal Organization

• A competitor is not part of the internal organization
• The board and senior management are part of the internal organization
• Colleagues are part of the internal organization
• Policy is part of the internal organization

Expanded Likelihood Rating

• Unlikely-very low expanded likelihood rating means that no threat is expected
• Very likely-high expanded likelihood rating means that a sure/ unavoidable threat is expected
• Remote- low-somewhat likely expanded likelihood rating means that a highly probable threat is expected
• Certain or imminent-very high expanded likelihood rating means that a probable threat is expected

Risk Matrix

• Risk Matrix is not required for all risk management plans of all organizations
• Risk Matrix is not an ancillary instrument for risk based audits
• Risk Matrix reflects the likelihood & potential impact so that the organization can focus to more critical risks
• Risk Matrix is recommended tool in Risk management

Objective Based Approach of Assessing Risk

• Objective based approach of assessing risk is based on actual events
• Events may have positive or negative impact
• All events affecting the organization’s objectives partially or completely should be considered
• Objective based approach of assessing risk is not based on theoretical scenarios

Resolving Bottlenecks

• Streamlining resolves bottlenecks

Resolving Issues Related to Consignment

• Integrating real-time inventory management software resolves issues related to consignment

Risk Response

• The best option for risk response in all circumstances is not to tolerate risk
• Legal and regulatory requirements is one of the considerations in tolerating risk
• Organizations do not always tolerate risks within their risk appetite without exceptions
• Risks are accepted or tolerated after the consideration of some of the cost effective controls

Risk Treatment

• Treating the risk is applied mostly in situations of high likelihood and low impact risk
• Risk of regulatory non-compliance is one of the risks which is normally not tolerated
• Risk is normally tolerated if the expected benefit is lower than the estimated cost
• Investing your own money is an example of tolerating financial loss
• Businesses avail property insurance to transfer financial risks of property damage to the insurance company

Risk Transference

• Insurance is not the main tool for hazard risk transfer and to a greater extent of control risk
• Terminating risk is applicable for high likelihood, high-impact risk
• The risk response for potential risk of overheating for automobile manufacturing is an example of terminating risk
• The risk response to recall a batch of poisoned canned product is not an example of transferring risk
• When an organization cannot terminate a risk because the activity associated with the risk is fundamental to its operations, alternative measures would be necessary
• Substituting the process or activity is not one of the approaches in tolerating risks