INTRODUCTION TO RISK MANAGEMENT

ENTERPRISE RISK MANAGEMENT

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QUESTIONS ABOUT RISK MANAGEMENT - WHAT, WHO, HOW?

- What is Risk Management?

- Who uses Risk Management?

- How is Risk Management used?

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QUESTIONS ABOUT RISK MANAGEMENT - WHAT, WHO, HOW?

- What is Risk Management?

• Good management practice
• Process steps that enable improvement in
decision making
• A logical and systematic approach
• Avoiding or minimizing losses
• Identifying opportunities

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DEFINITION:

RISK MANAGEMENT is the name given to a logical and systematic method

of identifying, analyzing, treating and monitoring the risks involved in any
activity or process.

A methodology that helps managers make best use of their available

resources

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WHO USES RISK MANAGEMENT

Risk Management practices are widely used in •• Finance

Financeand
and
public and the private sectors, covering a Investment
Investment
wide range of activities or operations. •• Insurance
Insurance
•• Health
HealthCare
Care
•• Public
Public
Institutions
Institutions
•• Governments
Governments

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WHO USES RISK MANAGEMENT

Effective 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.)
Risk Management is now an integral part of business planning.

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HOW IS RISK MANAGEMENT USED

The Risk Management process steps are a generic guide for any organization,
regardless of the type of business, activity or function.

There are
7 steps
in the RM
process

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THE BASIC PROCESS STEPS ARE

Establish
Establishthe
thecontext
context

Identify
Identifythe
therisks
risks

Analyze
Analyzethe
therisks
risks

Evaluate
Evaluatethe
therisks
risks

Treat
Treatthe
therisks
risks

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THE BASIC PROCESS STEPS ARE

‘Risk’ is dynamic and subject to constant change, so the

process includes continuing:

Monitoring
Monitoringand
andreview
review

Communication
Communication&&consultation
consultation

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1- ESTABLISH THE CONTEXT

 The strategic and organizational context in which risk

management will take place.
 For example,
 the nature of your business,
 the risks inherent in your business, and
 your priorities

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2- IDENTIFY THE RISK

 Defining types of risk, for instance,

 Credit Risk
 Market Risk
 Operation Risk
 Residual Risks
 Strategic Risk
 Reputational Risk
 Identifying the stakeholders, (i.e., who is involved or affected).
 Evaluate past events and future developments.
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3- ANALYZE 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

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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.

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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)
 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.

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6- MONITOR AND REVIEW

 In identifying, prioritizing and treating risks

 organizations make assumptions and decisions based on situations that
are subject to change, e.g.,
 the business environment,
 trading patterns, or
 government policies
 Monitoring of risk is must be through,
 data evaluation,
 audit,
 compliance measurement

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Thank you

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