Understanding Risk Greg Hungerford

What is Risk? “An adverse event resulting from business operations or its operating environment that could jeopardise the businesses ability to achieve its objectives” or favourable or advantage

Traditional – pure risks Modern - opportunities Three Approaches to Risk Traditional – pure risks Modern - opportunities Emerging – different affects on stakeholders

Operational and Environmental Risks Legal Risks Strategic Risks Types of Risk Financial Risks Operational and Environmental Risks Legal Risks Strategic Risks Privacy and Information Risks

Sources of Risk Intrinsic Risks Extrinsic Risks

Intrinsic Risks Extrinsic Risks Reputation Human Capital Operational Technological Financial Strategic Extrinsic Risks Supply Lines Competition Man-made Disasters Natural Disasters Political and Legislative Societal and Technical

What is Risk Management? “The culture, process and structures that are directed towards the effective management of potential opportunities and adverse effects."

Hard v’s Soft Aspects Risk Management Culture (People) Structures Processes

Embedded v’s Separate Activity Culture Embedded v’s Separate Activity Everybody becomes involved Philosophy “Doing the Right Thing”

Mission, Vision, Values, Purpose Systems and Processes Structure Cultural Drivers Mission, Vision, Values, Purpose Systems and Processes Structure Leadership Job Design and Role Definition Desired v’s Actual Behaviours

Risk Management Strategy Risk Management Policies Structure Risk Management Strategy Risk Management Policies Risk Management Procedures Risk Register

Communicate and Consult Processes – Managing Risk Communicate and Consult Establish Context Identify Risks Analyse Evaluate Treat Monitor and Review

Analyse recipients of message Develop key messages and purpose Communicate and Consult Establish Context Identify Risks Analyse Evaluate Treat Monitor and Review Communicate and Consult Establish objectives Analyse recipients of message Develop key messages and purpose Identify communication owners and senders Identify appropriate channels Determine timing of communication Deliver key messages

Intrinsic v’s Extrinsic Objectives Scope and Resources Record Keeping Communicate and Consult Establish Context Identify Risks Analyse Evaluate Treat Monitor and Review Establish Context Intrinsic v’s Extrinsic Objectives Scope and Resources Record Keeping Risk Tolerance

…… something could happen Communicate and Consult Establish Context Identify Risks Analyse Evaluate Treat Monitor and Review Identify Risks What Where When Why How …… something could happen

Document risk identification process Communicate and Consult Establish Context Identify Risks Analyse Evaluate Treat Monitor and Review Identify Risks What to consider Risk Categories Gather Information Tools and Techniques Brainstorming Flow Charting etc Document risks Document risk identification process

Existing controls Risk likelihood Risk consequence Risk level Communicate and Consult Establish Context Identify Risks Analyse Evaluate Treat Monitor and Review Analyse Risks Existing controls Risk likelihood Risk consequence Risk level

Analyse Risks

Rank the risks Overall risk profile Prioritise risks Evaluate Risks Communicate and Consult Establish Context Identify Risks Analyse Evaluate Treat Monitor and Review Evaluate Risks Rank the risks Overall risk profile Prioritise risks Risk   Likelihood Consequence Overall Rating Ranking A 2 4 6 B 3 12 C 8 D 1 7 E 9 F 5 G 15

Evaluate Risks

Identify risk treatment options Select risk treatment options Communicate and Consult Establish Context Identify Risks Analyse Evaluate Treat Monitor and Review Treat Risks Identify risk treatment options Select risk treatment options Assign risk ownership Prepare risk treatment plans

Change the Consequence Share/Transfer the Risk Retain the Risk Treat Risks Treatment Options Avoid the Risk Change the Likelihood Change the Consequence Share/Transfer the Risk Retain the Risk

Understand the different types and levels of monitoring and review Communicate and Consult Establish Context Identify Risks Analyse Evaluate Treat Monitor and Review Monitoring and Review Understand the different types and levels of monitoring and review Establish your monitoring and review cycle Measure risk management performance

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