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Risk Management……… Not just part of good management it’s all of it!!. Presented by Mike Robertson Managing Director. Presented on 11 February 2008. Outline. Quick review of history Some definitions / terminology Risk management in practice

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Risk management not just part of good management it s all of it

Risk Management………Not just part of good managementit’s all of it!!

Presented by Mike Robertson

Managing Director

Presented on 11 February 2008


Outline
Outline

  • Quick review of history

  • Some definitions / terminology

  • Risk management in practice

  • Demonstration that risk management and good management are the same thing


Historical origins of risk thinking
Historical origins of risk thinking

Pierre de Fermat

(1601-1665)

Jakob Bernoulli

(1654-1705)

Blaise Pascal

(1623-1662)

Gerolama Cardano

(1501-1665)

Abraham de Moivre

(1667-1754)

Daniel Bernoulli

(1700-1782)

Thomas Bayes

(1702 – 1761)


Historical origins of risk thinking1
Historical origins of risk thinking

Pierre de Fermat

(1601-1665)

Jakob Bernoulli

(1654-1705)

Blaise Pascal

(1623-1662)

Gerolama Cardano

(1501-1665)

Abraham de Moivre

(1667-1754)

Daniel Bernoulli

(1700-1782)

Thomas Bayes

(1702 – 1761)




Key uk government reports1
Key UK Government reports

http://www.hse.gov.uk/risk/theory/r2p2.htm

http://www.cabinetoffice.gov.uk/strategy/work_areas/risk.aspx

http://www.hm-treasury.gov.uk./documents/public_spending_reporting/governance_risk/psr_governance_risk_riskguidance.cfm

http://archive.cabinetoffice.gov.uk/brc/


Definitions terminology
Definitions / Terminology

Definition

(What?)

Identification

(To whom?)

Estimation

(How bad? Often?)

Evaluation

(So what?)

Action

(Implement,

monitor)

Risk Analysis

Risk Assessment

Risk Management


Risk management actions
Risk management actions

  • Transfer

    • e.g. insure against the threat being realised

  • Tolerate

    • Requires some criteria to be tested against

    •  concept of ‘risk appetite’

  • Treat

    • Apply additional or more effective controls

  • Terminate

    • Eliminate the threat completely



Examples of impact scales
Examples of impact scales

Scale

Impact

High (H)

Partial line closure (or worse)

Board of a battery manufacturer

Scale

Impact

Medium High (MH)

Station closure

High (H)

Threatens business survival

Medium Low (ML)

Journey delay> 2 mins

Medium High (MH)

Long term damage to business

Low (L)

Journey delay< 2 mins

Medium Low (ML)

Short term damage to business

Operations managers on LUL

Low (L)

Trivial


Examples of likelihood scales
Examples of likelihood scales

Scale

Likelihood

High (H)

Greater than once per day

Board of a battery manufacturer

Scale

Likelihood

Medium High (MH)

Greater than once per week

High (H)

Once a month

Medium Low (ML)

Greater than once per month

Medium High (MH)

Once a year

Low (L)

Greater than once per year

Medium Low (ML)

Once every five years

Operations managers on LUL

Once every twenty years

Low (L)


Risk assessment
Risk assessment

X1

X2

X3

X4

X6

X5

X7

X8

X10

X11

X9

X12


Risk management
Risk management

Terminate

Transfer

Treat

Treat

X1

X2

X3

X4

X6

X5

X7

X8

X10

X11

X9

X12


Tolerability of risk and alarp
Tolerability of risk and ALARP

Risk of death:

Worker & public:

1 in 1,000,000 per year

Risk of death:

Worker: 1 in 1,000 per year

Public: 1 in 10,000 per year

Source: Risk: Improving government’s capability to respond to risk and

uncertainty, Strategy Unit, Cabinet Office, November 2002


Risk decision making framework
Risk decision making framework

Decision context

  • Nothing new or unusual

  • Risks well understood

  • Established practice

  • No major stakeholder implications

Codes &

standards

A

Good practice

Engineering judgement

  • Lifecycle implications

  • Some risk trade-offs / risk transfer

  • Some uncertainty or deviation from established or best practice

  • Significant cost implications

B

Risk based analysis e.g. QRA, CBA

Company values

  • Very novel or challenging

  • Strong stakeholder views and perceptions

  • Significant risk trade-offs / transfer

  • Large uncertainties

  • Perceived lowering of safety standards

Societal

values

C

Input to decision making process

Adapted from : A Framework for Risk Related Decision Support,

UKOOA, 1999


Evolution of risk management
Evolution of risk management

Source: Risk: Improving government’s capability to respond to risk and

uncertainty, Strategy Unit, Cabinet Office, November 2002


Risk management good management
Risk management = good management?

Firm infrastructure

Human resource management

Margin

Technology development

Procurement

Inbound

logistics

Operations

Outbound

logistics

Marketing

and sales

Service

Margin

  • How robust are our:

  • Processes?

  • IT/IM Systems?

  • Financial control?

  • Governance?

  • How robust is our:

  • Recruitment policy?

  • Development processes?

  • Succession planning?

  • HR system (up-to-date)?

  • Reward systems?

  • Is our technology:

  • Safe?

  • Out-dated?

  • Reliable?

  • Expensive to maintain?

  • Leading edge or good practice?

Source: M E Porter, Competitive Advantage, 1985


Final thoughts
Final thoughts

  • Risk management is an evolving discipline

  • Process is generic ………but one size does not fit all

    • FITNESS FOR PURPOSE !

  • Objectives of good risk management are to:

    • minimise risk to your business

    • maximise chance of realising opportunity

    • recognise and understand how uncertainty can affect your decisions

    • do all this in a transparent and auditable way

  • …….which is what good managers do anyway!


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