Intro to Risk Management Unit 1 PDF

 Introduction to Risk Management....... POST GRADUATE DIPLOMA IN RISK MANAGEMENT Unit 1: An Introduction to Risk Unit 2: Impact of Risk on an Organisation Unit 3: Types and Classification of Risk Unit 4: Introduction and Developm...

 Introduction to Risk Management....... POST GRADUATE DIPLOMA IN RISK MANAGEMENT Unit 1: An Introduction to Risk Unit 2: Impact of Risk on an Organisation Unit 3: Types and Classification of Risk Unit 4: Introduction and Development of Risk Management Unit 5: Principles and Aims of Risk Management Unit 6: Risk Evaluation Unit 7: Risk Management Standards Presented by Unit 8: Risk Management Model Unit 9: The Bigger Picture: A case Analysis Coster Ruzengwe 3  Unit 1: An Introduction to Risk Management....... CORPORATE RISK MANAGEMENT Outcomes: Explain and define risk in the relative organisational environments Examine the various types of risk which exist and in an organisation and explain the definition of these risks Evaluate risk description, inherent levels of risk, risk likelihood and magnitude and the classification of risks 4  Introduction and definitions....... UNIT 1: AN INTRODUCTION TO RISK MANAGEMENT Events or situations that could have a potential impact on an organisation and its objectives may prevent what it is seeking to accomplish (hazard risks), enhance the organisations aim (opportunity risk) or create a degree of uncertainty and doubt about the achievement of outcomes (control risks). Smith (2009) defines risk as a decision expressed by a range or possible outcomes with attached probabilities. When there are a range of possible outcomes but no assumed probabilities, there is only uncertainty. 5  Risk vs Uncertainty....... UNIT 1: AN INTRODUCTION TO RISK MANAGEMENT Uncertainty presents itself in everyday language in three Risk is equally difficult to define clearly and risk analysis is often different directions which relates: explained as a concept which contains two dimensions. The first to the external world, dimension is the degree of possibility that an event will take to knowledge, and; place, and the second is the consequences of this event. to the mind, respectively. The word “risk” is often used more or less synonymously with “hazard” The term risk is usually limited to situations in which the probabilities of possible outcomes are known and can be estimated with some degree of accuracy, whereas uncertainty is used in situations where such probabilities cannot be estimated 6  Types of Risk....... UNIT 1: AN INTRODUCTION TO RISK MANAGEMENT A risk may result in a positive or negative outcome or it could result in an uncertainty of future events and their impact, due to this risks can therefore be considered to have a relation to an opportunity / loss or the presentation of uncertainty in an organisation. Different types of risk have their individual characteristics and they require the most suitable management or analysis. Risks can be divided into three categories: 1. hazard (or pure) risks - only result in outcomes There is no ‘right’ or ‘wrong’ subdivision of risk which are negative / tolerance and the most imperative concern is that each 2. control (or uncertainty) risks - that give rise to organisation makes an adoption of a risk uncertainty about the outcome of a certain classification system which will be most suited situation / range to the organisations circumstances. 3. opportunity (or speculative) risks - achieving a return which is positive / appetite 7  Risk Description....... UNIT 1: AN INTRODUCTION TO RISK MANAGEMENT Name or title of risk Statement of risk, including scope of risk and details of possible events and dependencies Nature of risk, including details of the risk classification and timescale of potential impact Stakeholders in the risk, both internal and external Risk attitude, appetite, tolerance or limits for the risk Likelihood and magnitude of event and consequences should the risk materialize at current/residual level Control standard required or target level of risk Incident and loss experience Insight into the range of data Existing control mechanisms and activities that an organisation should Responsibility for developing risk strategy and policy record in order to fully Potential for risk improvement and level of confidence in existing controls understand a risk Risk improvement recommendations and deadlines for implementation Responsibility for implementing improvements Responsibility for auditing risk compliance 8  Inherent levels of risk....... UNIT 1: AN INTRODUCTION TO RISK MANAGEMENT The guidance from the IIA states that ‘in the risk assessment, we look at the inherent risks before considering any controls.’ Inherent levels of risk - prior to any actions been taken to change the likelihood or magnitude of the risk 9  Risk Likelihood and Magnitude....... UNIT 1: AN INTRODUCTION TO RISK MANAGEMENT Risk likelihood and magnitude are demonstrated in the best way by using a risk map which is also referred to as a risk matrix. The elementary style of a risk matrix plots the likelihood of an event against the magnitude or impact should the event come to materialize. Utilising a risk matrix to illustrate risk likelihood and magnitude is a fundamental risk management tool as it can be used to plot the nature of individual risks which will enable the organization to make a decision on whether or not the risk is acceptable and within the risk appetite and/or risk capacity of the organization. The vertical axis is used to indicate magnitude of the event and the diagonal axis the likelihood of the risk occurring. The most important consideration for risk managers in the impact or consequence of an event and not just the magnitude. 10  Risk Matrix....... UNIT 1: AN INTRODUCTION TO RISK MANAGEMENT 11