Risk Management
Process
Part 02 – Risk Management
Basic steps in Risk Management Process
1) Risk Identification
2) Risk Assessment
3) Risk Prioritization
4) Risk Response Planning
5) Risk Monitoring
Risk Management Process
1) Risk Identification
Identify all possible events that might adversely impact or otherwise prevent the
company from achievement its objectives.
Company should analyze its,
a) Internal business
b) External Environment
c) Business Processes
d) Existing Controls.
The risk identification process should take place at all levels of the organization.
Within each business unit, key employees should be tapped to take part in the
identification of risks in their respective areas.
a) Operations
b) Finance and Accounting
c) IT
d) Unit Management
Risk Management Process
Internal Events
1) Capital investments made to support strong customer demand, improve
customer satisfaction, reduce downtime, and so forth.
2) Technological change creating the need for new processes and changed
processes.
3) Personnel events such as work stoppages, employee fraud, or the loss of
key employees.
Risk Management Process
External Events
1) Economic events, both domestic and international, such as a recession or
international trade events leading to currency and other price
fluctuations.
2) Natural disasters such as fires, floods, hurricanes, earthquakes, or
volcanoes.
3) Political events such as new regulations, changes in tax laws, and results
of elections.
4) Social factors such as changing demographics.
5) Technological change creating opportunities for new products or services
to offer
Risk Management Process
Event Identification Techniques
1) Brainstorming sessions
2) Event inventories and loss event data
3) Interviews and self-assessment
4) Facilitated workshops
5) SWOT analysis
6) Risk questionnaires and risk surveys
7) Scenario analysis
8) Technology
Risk Management Process
Event Identification Techniques
1) Brainstorming sessions are meetings in which employees, management,
or staff members are invited to discuss the risks they encounter in their
fields and to develop solutions through dialogue and idea sharing.
Sharpe Decisions, Resolver Ballot, OptionFinder, FacilitatePro
2) Event inventories and loss event data can be used in brainstorming
sessions to provide the participants with risks to consider.
Event inventories are detailed listings of potential events common to
companies within a particular industry or to a particular process or activity
common across industries.
Loss event data could be a database on actual loss events that have taken
place for a specific industry.
Risk Management Process
Risk Management Process
3) Interviews and self-assessment:
Each unit assesses its risk management capability and submits its self -
assessment to the risk management coordinator.
4) Facilitated workshops
Involve a facilitator leading a discussion about events that may affect the
achievement of the entity’s objectives, in order to identify the most critical
risks.
For example, a financial controller might conduct a workshop with the
accounting team to identify events that could have an impact on the entity’s
external financial reporting objectives.
Risk Management Process
5) SWOT analysis is used for formulating strategy.
“SWOT” stands for Strengths, Weaknesses, Opportunities, and Threats.
Strengths and weaknesses are internal and include the company’s culture,
structure, financial resources, and human resources.
Opportunities and threats are external and are usually not under the control
of management in the short run.
Strength – strong brand, loyalty, customer base, unique technology, unique
products.
Weakness – Debt, Weak brand, Lack of Capital
Opportunities – Country cuts tariffs, increased market shares
Threat – Rising cost of DM, increase competition, tight labor supply.
Risk Management Process
6) Risk questionnaires and risk surveys are other sources of information to
identify potential risks by providing a list of questions relating to specific
risks, both internal and external. Questionnaires can help management
think through its risks by providing a list of questions relating to specific
risks.
A risk survey may be used instead of a questionnaire. A risk survey is more
open-ended, for instance asking each participant to list the five most
important risks to achieving the company’s strategic objectives.
Internal – Customer, creditors/ investors, suppliers, operations, products,
facilities etc.
External – Political risk, social risk, environmental risk, economic risk,
competition risk etc.
Risk Management Process
7) Scenario analysis Involves “what-if” questions. Managers consider various
scenarios that could occur and how they would impact the business.
Example,
Earthquake
▪ Key employee risk
▪ Product damage
▪ Market share loss
▪ Customer Care
▪ Worker Compensation
▪ Capital market risk due to inability to trade etc.
Risk Management Process
8) Technology can be used internally and externally to communicate.
Technology can be used externally to scan the internet for risks related to
the company’s products, services, and reputation.
Intranet and Internet is used
Risk Management Process
RABEEH OVUNGAL
Thanks for Watching
Risk Management Process
Part 02 – Risk Management
