Risk Management
Riaz Esmailzadeh
We acknowledge and pay our respects to the Kaurna people,
the traditional custodians whose ancestral lands we gather on.
We acknowledge the deep feelings of attachment and relationship of the
Kaurna people to country and we respect and value their past, present
and ongoing connection to the land and cultural beliefs.
Outline
Definitions
Analysis
Representation
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What Is Risk?
Risk is the possibility of something bad happening.
It involves uncertainty about the effects/implications of an activity with respect to
something that we value (such as health, well-being, wealth, property or the
environment).
It often focuses on negative, undesirable consequences. (Wikipedia)
In the context of your projects, you may think of all the ways your “5,5,25” may
not be realised.
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Risk Analysis
Risk may be analysed with respect to:
Loss: if an event occurs (or don’t occur) how much loss will we incur?
E.g. what if your competitor comes up with a new product
Likelihood: what is the probability (between 0 and 1) that the event occurs
E.g. what is the chance of a change of government?
Control: how much control do we have over the event? Can we minimise its
likelihood of occurrence? Can we minimise the loss associate with the event?
E.g. how much control do we have over these events and losses?
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Dealing with Risk
We can avoid the risk by
Changing our circumstance so the risk will not apply to us, for example leaving
the market for a particular good altogether
We can transfer the risk by
Passing it to someone else (sell the business) or buy insurance
We can assume the risk by
Accept it might happen, and rationalize and control possible loss if it occurs
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Risk Identification
Risks identification is a continuous process,
Monitor different aspects of a business
Finance, operations, market, competition
Create a risk register for your
Important assets
Important lines of business
Important projects, etc
Seek external audit
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Risk Assessement
Risks may be assessed based on the impact they could have on an organisation
Loss, probability and control
This process can be qualitative or quantitative
Losses can be: minimal, substantial, etc; or $5,000, $10M, etc
Probability can be: unlikely, highly likely, etc; or 10%, 85%, etc.
Controls can be: no control, very effective, etc; or insured to the value of $10M
In strategic projects, we need to be specific and quantitative as much as possible,
this allows the management to monitor effectively.
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Risk Matrix
Risk matrix is one method of visualising the risk an organisation faces
It may be drawn in a qualitative or quantitative way, and mark individual risks
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Heat Map
A more complex way of
illustrating and analysing
risk is using a heat map
Here the risks are mapped
based on their likelihood,
impact, risk category and
degree of control
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Summary
Risks are a part of life
In business we need to be
aware of risks,
understand their probability and impact and
find ways to deal with them
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CRICOS 00123M