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 RISK

MANAGEMENTTRAINING

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What is risk ?

Risk: the effect of uncertainty

on objectives.

(ISO 31000:2009)

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What is Risk Management ?

Risk Management: coordinatedactivities to direct and control and

organisation with regard to risk

(ISO 31000:2009)

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Risk Management Principles

1. Risk management creates & protects value

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Risk Management Principles

2. Risk management is an integral part of allorganizational processes

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Risk Management Principles

3. Risk management is part of decision making

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Risk Management Principles

4. Risk management explicitly addressesuncertainty

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Risk Management Principles

5. Risk management is systematic, structuredand timely

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Risk Management Principles

6. Risk management is based on the bestavailable information

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Risk Management Principles

7. Risk management is tailored

8. Risk management takes human & cultural

values into account

9. Risk management is transparent and inclusive.

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Risk Management Framework

• Risk Management Framework: a set of

components that provide the foundations and

organizational arrangements for designing,

implementing, monitoring, reviewing andcontinually improving risk management

throughout the organization.• From ISO 31000:2009

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Mandate & Commitment

Design of framework for managing risks

Continual improvement of

the framework

Implementing Risk

Management

Monitoring & review of

the framework

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Continual Improvement &

PDCA Cycle

by Walter A. Shewhart

(1891 -1967) 

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Design of framework for managing risks

• Understand the organisation & its context

• Establish risk management policy

•

Accountability• Integration into organisational processes

• Resources

• Establish internal communication & reporting• Establish external communication & reporting

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Risk Management – Notes 1

• Risk Management involves thinking – as the

answers are not in books, and not available

via Google.

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Risk Management – Notes 2

• When implementing the Risk Management

process -

• In which time direction are we primarily

looking?

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Risk Management – Notes 4

• History provides some guide to the future

based on the idea: history repeats itself

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Establish the context

Risk identification

Risk analysis

Risk evaluation

Manage / treat the risks

Monitor&

Review

Communicate&Consult

Risk acceptable?

 Yes

No

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Establish the context

Establish the external context;

Establish the internal context;

Establish the risk management context;

Develop risk criteria 

Define the structure for the rest of the process 

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Establish the context

Establish the external context;

Establish the internal context;

Establish the risk management context;

Develop risk criteria 

Define the structure for the rest of the process 

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Identify Risks

Identify all risks, including those risks not

controlled by the organisation.

Tools and techniques for Risk Identification 

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Risk Identification

Sources of risk 

Key questions in

identifying risk 

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Risk Identification & Risk Analysis

• Risk Identification and Analysis is like looking

into the crystal ball

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Risk Analysis

In conducing a risk analysis we: 

Put a value on Likelihood; and

Put a value on Consequence.

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Risk Analysis

• Putting values on Likelihood & Consequence

is predicting the future.

• There is no ‘right’ or ‘wrong’ value for

Likelihood nor Consequence, because

  We are looking into the future, and

  No-one knows the future, except maybe

the

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CONSEQUENCE

L  I   K E L  I   H  O OD

  1 2 3 4 5

Insignificant Minor Moderate Major Catastrophic

5 Almost Certain 5 10 15 20 25

4 Above Average 4 8 12 16 20

3 Moderate 3 6 9 12 15

2 Rare 2 4 6 8 10

1 Very Rare 1 2 3 4 5

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Risk Analysis

The objectives of risk analysis are to: 

separate the minor acceptable risks from the

major risks; and

provide information to assist the evaluation

and management of risks.

Key Questions related to Risk Analysis 

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Risk Analysis

The consequences of risks, and the likelihood

that the risks may occur, are combined to

produce:

  a level of risk 

  (or risk rating).

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Risk Evaluation

Risk evaluation involves:

comparing the level of risk found during the risk

analysis process,

with previously established risk criteria.

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Risk Evaluation

The output of risk evaluation is: 

1. determination of which risks are

significant, and therefore require treatment;

and

2. a prioritised list of significant risks for

treatment.

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Risk evaluation should take into account:

the existing controls over the risk;

the cost impacts of the risk;

the benefits and opportunities presented by therisk.

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Risk Treatment / Risk Management

Risk treatment: process to modify risk.

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Risk Acceptable ?

Identify treatment options

 Assess treatment options

Prepare treatment plans

Implement treatment plans

Residual Risk Acceptable ?

No 

Monitor&

Review

Communicate&

Consult

 Yes

No 

 Yes

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Residual Risk

Definition: The ‘risk remaining after risk

treatment’ From: ISO 31000:2009

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Risk treatment options for risks with

positive outcomes

  Actively seek an opportunity;

 

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Risk treatment options for risks with

positive outcomes

  Change the likelihood of the opportunity (for

increased beneficial outcomes);

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Risk treatment options for risks with

positive outcomes

  Change the consequences of the

opportunity (for increased beneficial

outcomes);

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Risk treatment options for risks with

positive outcomes

  Share the opportunity

f

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Risk treatment options for risks with

positive outcomes

  Retain the residual opportunity.

k f k h

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Risk treatment options for risks with

negative outcomes

  Avoid the risk;

  Reduce the likelihood of the risk causing

negative outcomes;

i k i f i k i h

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Risk treatment options for risks with

negative outcomes

  Reduce the consequences of the risk

causing negative outcomes;

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Ri k i f i k i h

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Risk treatment options for risks with

negative outcomes

  Share the risk;

Ri k i f i k i h

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Risk treatment options for risks with

negative outcomes

  Retain the residual risk.

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Risk Treatment

1. Identify risk treatmentoptions 

2. Assess risk treatment options 

3. Prepare Risk Treatment Plans

4. Implement Risk TreatmentPlans 

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Escalation in Risk Management

Risk rating escalation

- Is critical to ensure

risks are known &

accepted at the

appropriate

management level

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Escalation in Risk Management

Risk rating escalation

- Is critical to ensure

risks are known &

accepted at the

appropriate

management level

• Reputation• Penalties

• new projects

• existing work

• viability of

BP

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Monitor & Review

It is essential to continually monitor and

review:

the identified risks; the effectiveness of the Risk Management

Plan; and

the outcomes of the Risk Management

Plans.

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Did we achieve the objectives?

Do you understand:

1. The Risk Management process?

• Establish the risk context;

• Assess risks;

•

Manage / treat risks;• Monitor risks & risk management actions.

2. ISO 31000:2009

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RISK MANAGEMENT

The End

Thank you

remember Risk

Management is as

important as your

own life