Risk Management

Source: UNCTAD 2000

 What is Risk?

• Risk is an unwanted negative consequence of

an event of which the possible undesirable
outcome can be identified, predicted and
quantified.
• Uncertainty is an unknown situation, where
its possible outcome cannot be analysed or
predicted. E.g. weather uncertainty.
 What can you do about Risk?

• Risk lends itself to statistical analysis.

• Since it can be statistically analysed, the risks
can be;
- eliminated,
- reduced, or
- transferred to a third party at a cost or
managed for a profit.
 What is Risk Management?

• Good management practice

• Process steps that enable improvement
in decision making
• A logical and systematic approach
• Identifying opportunities
• Avoiding or minimising losses

Source: UNCTAD 2000

 Risk Management is the name given
to a logical and systematic method
of identifying, analysing, treating
and monitoring the risks involved in
any activity or process.

Risk Management is a
methodology that helps managers
make best use of their available
resources

Source: UNCTAD 2000

 Risk Management
The identification, analysis, assessment, control,
and avoidance, minimization, or elimination of
unacceptable risks.

An organization may use risk assumption,

risk avoidance, risk retention, risk transfer,
or any other strategy (or combination of strategies)
in proper management of future events.
 The purpose of studying
RM
To develop the capability to identify, assess,
improve and limit risk in the management and
practice of engineering through the application
of concepts and tools of risk engineering.

On completion, you will be able to identify

hazards in an engineering project and
design an appropriate risk management
strategy.
 Risk Management
practices are widely used
in public and the private
sectors, covering a wide
range of activities or
operations. • Finance and
These include: Investment
• Insurance
• Health Care
• Public
Institutions

• Governments
Source: UNCTAD 2000
 The Risk Management process steps are a
generic guide for any organisation, regardless
of the type of business, activity or function.

There are
7 steps
in the RM
process

Source: UNCTAD 2000

 RISK MANAGEEMNT PROCESS
CONT’D

A Risk Process, or Risk Management Process,

describes the steps you need to take to identify,
monitor and control risk.

Within the Risk Process, a risk is defined as any

future event that may prevent you to meet your
team goals.
RISK MANAGEEMNT PROCESS
CONT’D

A Risk Process allows you to identify each risk, quantify

the impact and take action now to prevent it from
occurring and reduce the impact should it eventuate

You use a Risk Process whenever your ability to meet your

objectives is at risk.
 The basic process steps are:

1. Establish the context

2. Identify the risks

3. Analyse the risks

4. Evaluate the risks

5. Treat the risks

Source: UNCTAD 2000

 ‘Risk’ is dynamic and subject to constant
change, so the process includes
continuing:

6. Monitoring and review

and

7. Communication & consultation

Source: UNCTAD 2000

 The Risk Management process:
1. Establish the context

Defining types of risk, for instance,

‘Strategic’ risks to the goals and objectives
of the organisation.
• Identifying the stakeholders, (i.e.,who is
involved or affected).
• Past events, future developments.

Source: UNCTAD 2000

 The Risk Management process:
2. Identify the risks

Defining types of risk, for instance,

‘Strategic’ risks to the goals and objectives
of the organisation.
• Identifying the stakeholders, (i.e.,who is
involved or affected).
• Past events, future developments.

Source: UNCTAD 2000

 The Risk Management process:
3. Analyse the risks

How likely is the risk event to happen?

(Probability and frequency?)
What would be the impact, cost or
consequences of that event occurring?
(Economic, political, social?)

Source: UNCTAD 2000

 The Risk Management process:
4. Evaluate the risks

Rank the risks according to management

priorities, by risk category and rated by
likelihood and possible cost or
consequence.
Determine inherent levels of risk.

Source: UNCTAD 2000

 The Risk Management process:
5. Treat the risks

Develop and implement a plan with specific

counter-measures to address the identified
risks.
Consider:
• Priorities (Strategic and operational)
• Resources (human, financial and technical)
• Risk acceptance, (i.e., low risks)

Source: UNCTAD 2000

 The Risk Management process:
5. Treat the risks
Document your risk management plan and
describe the reasons behind selecting the risk
and for the treatment chosen.
Record allocated responsibilities, monitoring or
evaluation processes, and assumptions on
residual risk.

Source: UNCTAD 2000

 The Risk Management process:
6. Monitor and review

In identifying, prioritising and treating risks,

organisations make assumptions and decisions
based on situations that are subject to change,
(e.g., the business environment, trading
patterns, or government policies).
Risk Management policies and decisions
must be regularly reviewed.

Source: UNCTAD 2000

 The Risk Management process:
6. Monitor and review
Risk Managers must monitor activities and
processes to determine the accuracy of
planning assumptions and the effectiveness
of the measures taken to treat the risk.
Methods can include data evaluation, audit,
compliance measurement.

Source: UNCTAD 2000

 The Risk Management process:
7. Communicate & consult
Communicate results to the team, and decide
whether risk is properly managed or further
measures are required.

Source: UNCTAD 2000

Thank you