Risk Management, FUIEMS, 30 December 2009 Engineering Economics Risk Management Lecture 16 Engineering Economics Risk Management Lecture 16.
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Risk Management, FUIEMS, 30 December 2009
Engineering EconomicsEngineering Economics
Risk ManagementRisk Management
Lecture 16Lecture 16
Engineering EconomicsEngineering Economics
Risk ManagementRisk Management
Lecture 16Lecture 16
Definition Of RiskDefinition Of Risk
Risk = f(Likelihood, Impact)
•Likelihood is the probability of occurrence
•Impact is the amount at stake
event
Risk = f(Hazard, Safeguard)
Risk Management, FUIEMS, 30 December 2009Mouse ‘Click’ to move on to the next slide NextNextNextNext
• Good management practice
• Process steps that enable improvement in decision making
• A logical and systematic approach
• Identifying opportunities
• Avoiding or minimising losses
What is Risk Management?What is Risk Management?What is Risk Management?What is Risk Management?
Risk Management, FUIEMS, 30 December 2009Mouse ‘Click’ to move on to the next slide NextNextNextNext
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.
What is Risk Management?What is Risk Management?What is Risk Management?What is Risk Management?
Risk Management, FUIEMS, 30 December 2009Mouse ‘Click’ to move on to the next slide NextNextNextNext
Risk Management is a methodology that helps
managers make best use of their available resources
What is Risk Management?What is Risk Management?What is Risk Management?What is Risk Management?
Risk ManagementRisk Management
Risk management focuses on the future
Risk and information are inversely related
Risk management focuses on the future
Risk and information are inversely related
Definition of Risk ManagementDefinition of Risk ManagementDefinition of Risk ManagementDefinition of Risk Management
Risk management is the act or practice of dealing Risk management is the act or practice of dealing
with risk.with risk.
It includes:It includes:
planningplanning for risk, for risk,
assessingassessing risk issues, risk issues,
developing developing risk handlingrisk handling strategies, and strategies, and
monitoringmonitoring risk risk to determine how they have to determine how they have
changed. changed.
Risk management is the act or practice of dealing Risk management is the act or practice of dealing
with risk.with risk.
It includes:It includes:
planningplanning for risk, for risk,
assessingassessing risk issues, risk issues,
developing developing risk handlingrisk handling strategies, and strategies, and
monitoringmonitoring risk risk to determine how they have to determine how they have
changed. changed.
Risk Management ProcessesRisk Management Processes
Risk planningRisk assessment
Risk identificationRisk analysis/quantification
Risk handlingRisk monitoring
Risk planningRisk assessment
Risk identificationRisk analysis/quantification
Risk handlingRisk monitoring
Risk TypesRisk Types
Financial risks
Market risks
Technical risks
Production risks
Financial risks
Market risks
Technical risks
Production risks
Risk HandlingRisk Handling
Assumption (retention)AvoidanceControl (mitigation)Transfer
Assumption (retention)AvoidanceControl (mitigation)Transfer
Risk Management, FUIEMS, 30 December 2009NextNextNextNext
Risk Management practices are widely used in public and the private sectors, covering a wide range of activities or operations.
These include:
Who uses Risk Management?Who uses Risk Management?Who uses Risk Management?Who uses Risk Management?
• Finance and Investment
• Insurance
• Health Care
• Public Institutions
• Governmen
ts
• Finance and Investment
• Insurance
• Health Care
• Public Institutions
• Governmen
ts
Risk Management, FUIEMS, 30 December 2009NextNextNextNext
• Effective Risk ManagementEffective Risk Management is a recognised and valued skill.
• Educational institutions have formal study courses and award degrees in Risk Management.
• The Risk Management process is well established. (International RM process standards.)
Who uses Risk Management?Who uses Risk Management?Who uses Risk Management?Who uses Risk Management?
Risk Management, FUIEMS, 30 December 2009NextNextNextNext
Risk Management isnow an integral part of
business planning.
Who uses Risk Management?Who uses Risk Management?Who uses Risk Management?Who uses Risk Management?
Risk Management, FUIEMS, 30 December 2009
The Risk Management process steps are a guide for any organisation, regardless of the type of business, activity or function.
How is Risk Management used?How is Risk Management used?How is Risk Management used?How is Risk Management used?
NextNextNextNext
There are
77 steps in the RM
process
Risk Management, FUIEMS, 30 December 2009NextNextNextNext
The basic process steps are:
Establish the contextEstablish the context
Identify the risksIdentify the risks
Analyse the risksAnalyse the risks
Evaluate the risksEvaluate the risks
Treat the risksTreat the risks
Risk Management, FUIEMS, 30 December 2009NextNextNextNext
‘Risk’ is dynamic and subject to constant change, so the process includes continuing:
Communication & consultationCommunication & consultation
Monitoring and reviewMonitoring and review
and
Risk Management, FUIEMS, 30 December 2009
The starting point is the The starting point is the Action PlanAction Plan::
1.1. Allocate responsibilitiesAllocate responsibilities
2.2. Evaluate how Risk Management processes Evaluate how Risk Management processes
can be best applied can be best applied
3.3. Survey existing skills and do a training Survey existing skills and do a training
needs assessmentneeds assessment
4.4. Catalogue existing sources of data or Catalogue existing sources of data or
information that can help in identifying information that can help in identifying
risksrisks
Using Risk ManagementUsing Risk ManagementUsing Risk ManagementUsing Risk Management
Risk Management, FUIEMS, 30 December 2009NextNextNextNext
5.5. Flow chart existing processes. Flow chart existing processes.
6.6. Communicate and consult Communicate and consult
7.7. Obtain or set up processes for effectively Obtain or set up processes for effectively operating a selectivity system.operating a selectivity system.
8.8. Provide training in profiling/selectivity Provide training in profiling/selectivity skills.skills.
9.9. Test and gain confidence in the Risk Test and gain confidence in the Risk Management process. Management process.
Using Risk ManagementUsing Risk ManagementUsing Risk ManagementUsing Risk Management
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