Professional Documents
Culture Documents
Risk Management and Decision Making
Risk Management and Decision Making
Risk Management and Decision Making
Decision Making
Risk Management
• Risks
• Financial Risks
2
Decision Making
• Under Certainty
• Under Risk
• Under Uncertainty
• Under Conflicts
3
Why Risk Management
• Systematic identification and management
• More realistic business and project planning
• Actions being implemented in time to be effective
• Greater certainty of achieving business goals and project objectives
• Appreciation of, and readiness to exploit, all beneficial opportunities
• Improved loss control
• Improved control of project and business costs
• Increased flexibility as a result of understanding all options and associated risks
• Greater control over innovation and business development
• Fewer costly surprises through effective and transparent contingency planning
4
RELEVANCE OF RISK MANAGEMENT
• number of different sites
• range of processes
5
Why No To Risk Management?
• Not familiar
6
ADVANTAGES OF RISK MANAGEMENT
• Source:
• The complete Guide to
Business Risk Management
• KIT Sadgrove
7
Major Common definitions
• Source of Harm
• Chance of Harm
• Uncertainty about loss
• Measurable uncertainty
• Volatility of return
• Statistically expected loss
• Likelihood and severity of events
• Consequences and associated uncertainty
• Uncertain events affecting objectives
• Uncertainty of outcome
• Asset, threat and vulnerability
• Human interaction with uncertainty
8
Risks
• Definition
• Health, business, economics, environment, finance, information,
Technology, , insurance, safety, security etc
9
Risks
• Definition (ISO Guide 73:2009)
• Uncertainty is the state, even partial, of deficiency of information related to, understanding or knowledge of,
an event, its consequence, or likelihood
10
Modern Risk Management
• Opportunities and Risks
• Method
• Identify the threats
• Assess the vulnerability
• Determine the likelihood and consequences
• Identify ways to reduce those risks
• Prioritize risk reduction measures
11
12
PROJECTS
• Organisation
• Single disciplined
• Single client & single contractor
• Multi-disciplined
• Multiple specialists, contractors, designers, consultants, etc.
• Government
• Private
13
Risk in Projects
• Risk event: What might happen to affect your project?
14
Strategies
• Accept
• Transfer
• Retention
• Sharing
• Avoid
• Reduce
15
Risk Management
ISO 31000 (2018)
Identification, evaluation, and prioritization
of risks (effect of uncertainty on objectives)
18
STRUCTURE OF RISK MANAGEMENT
• Continuous process
• Re-engineer itself
• Monitor Risks
20
Risk Management
• Construction Risks
• Known
• Certain
• Less effect in productivity
• Material cost swings
• Known unknown
• Predictable
• Known probability and effect
• Unknown unknown
21
Risk Management Strategy
• Risk ownership
• Party owning risk
• Exposure
• Transfer
• Risk Financing
• Budget
• Risk Allowance
• Contingency
• Effect
• Responsibilities of the parties
• Influence the control of design, construction, commissioning, change and risk
• Cost, time and quality
22
Risk Management
• Prioritisation
• Risk Vs Opportunity
• Probability
• Impact
• Intangible risks
• Productivity of knowledge workers
• Decrease cost-effectiveness
• Profitability
• Service quality
• Reputation
• Brand value
• Earnings quality
23
• Cost overrun
• Delay in completion
IDENTIFYING AND • Incompetent contractor
ASSESSING • Subcontractor default
• Environmental risks
• Design error
• Thefts
• Internal • Loss of paper works
• Change order
• Safety hazard
• External • Labour shortage
• Force majure
• Certain technical risks
• Socio-political unrest
• Lack of permits
• Unexpected hike in raw materials
• Unknown conditions
• Badly written contract
Decision Making
• Under Certainty
• Under Risk
• Under Uncertainty
• Under Conflicts
25
METHODS
• PRESTLE
• SWOT
26
EXTERNAL RISK
PESTLE Analysis
• Political
• Economic
• Social
• Technological
• Leagal
• Ethical / Environmental
INTERNAL RISK
SWOT Analysis
• Strengths and Weaknesses
• Outside
• Strategic
• Operational
• People
• Compliance
• Financial
• Technology
29
STRATEGIC RISKS
• Impact on the company’s costs, prices,
products and sales
• Government action
• Competitors
• Customers,
• New technology
30
STRATEGIC RISK
• Technology Risk
• IT Related
31
STRATEGIC RISK
• Technology Risk
• IT Related
• 87 per cent of businesses are significantly dependent on electronic data
• Canadian CEOs and CIOs by Ernst & Young, 34 per cent of respondents said computer system
failure was the most significant risk to business continuity, ahead of other threats such as
recession, commodity prices and exchange rates, disasters and terrorism.
• 44 per cent of businesses that suffered disruption. But 14 per cent suffered a major or very major
disruption for more than a day
• 65 per cent of those who said it was critical to restore their systems within 24 hours admitted they
could not do it
• 26 per cent do not have a business continuity plan
• 25 per cent have no computer disaster recovery plan
• 41 per cent have no overall crisis management plan
32
STRATEGIC RISK
• Government policies and economic change
• Legislation
• Recession
• Impact of the business cycle
• Changes In The Market
• Changes in channels – growth of the internet
• Retail concentration and the online aggregators
• New business models
• The pain of change
• Fads and fashion
• Staying in the same market too long
• Pricing Problem
• Ways out of a price war
• Pricing strategy
• Own label
• Counterfeiting & Mimicry
33