Components of Risk Management

Components of endangerment Management1st the definition of essay peril is scarcely a assertable threat that may occur during a item event or even in a normal day which may affect our lives in various counselings by changing the general r out(a)ine in a dramatic turn of events whether its Damage, loss, liability there is always a chance of a possible peril that may drop dead (though odds may change by the surrounding Environment, situations and the character of the risk) (BusinessDictionary.com, 2017)Examples of risk 1. Financial risk The surmise that a certain bulge out or argumentation may not cover the costs and expenses that been spent on it or even cause loss of resources.Examples of financial risk (Investinganswers.com, 2017)Economic danger is the possibility that Macroeconomic conditions like exchange rate, government economic Regime or political influences may affect the Economical state of an investment or an wide-cut countryPolitical risk is divided into two t ypes (Investopedia.com, 2017) Macro and Micro A macro risk refers to adverse actions that get out have an impact on totally foreign businesses expropriation or insurrection. On the second hand we have Micro risk and its remotely different from macro and the difference is that a little risk will affect a certain industrial field or business caused by corruption, prejudicial behavior against foreigner countries and their investments and usually will end up losing a lot of Money if they are unprepared for such turn of events. For example after Fidel Castros gained reckon over Cuba in 1959 light speed millions of dollars worth American Investments were expropriated by Castros government unfortunately most of these American businesses had no resources or alternative plans to retrieve their loss back.Liquidity risk the undermentioned situations will simplify the concept of liquidity risk (BusinessDictionary.com, 2017) Situation 1 not being able to fulfill the needs of depositors and borrowers due the lack of exchange or cash equivalents. Situation 2 sales of illiquid assets cheaper than their usual value. Situation 3 illiquid assets will not be sold in the scheduled conviction planned due to the lack of customers.2. Food industry Risk The possibility that harm may occur due to a certain hazard impact a certain magnitude.3. Work place risk The possibility that an detriment may occur during work whether the job is risky or not.2nd The Components of Risk (Project-Management.com) Risk has 3 components. These components should be taken separately one at a time in consideration while deciding how to manage a riskThe event that could happen.The possibility that an event could happen.The effects and the results if the event happens.How to begin? Analyze the possible risks that might happen to your business, life etc. Most of the Risks could be divided in two External and internal. Internal Risks Business owners have various ways to control internal risks which hap pen from day to day correspond in things like Strategies, financials and employees. External risks Such as disasters and compliance. These are hard to control, Analyze and prepare for however it could be make by a serial of preparations.The Plan (Investinganswers.com, 2017)Risk management plans guide you on your way to analyze the risk, find solutions and get ready to face that risk any given moment. though this plan doesnt describe the risk as a structure but the techniques of solving problems and facing these risks properly. Step 1 delineateing the possible risk (Gov.uk, 2017)First of all before taking any steps you should consider finding a group to think with about the possible risks. Its always better to think in groups to cover all the corners of the topic. Think of what could be threatening your business and how would it affect you and reflect on your work. You should be taking time to analyze and determine what the risks just about you are by covering all the surroundin g issues and thinking of the true potential risk and categorizing it. Categorizing risks depends on the nature of your work and your surroundings. For example if youre running a factory you should consider the risk of having technical difficulties such as the fact that machines may stop functioning or even injuries may occur indoors your factory. These elements you can control by taking the right cautious steps. These are called internal risks such as we mentioned before. However, in cases of natural disasters like earthquakes, volcanoes, tsunamis etc., there is vigour much you can do about it and you may not have control over these external risk elements.2nd step in our enumerate here is prioritizing project risk (Gov.uk, 2017)And its simply determining how likely or unlikely the mentioned risks may occur and calculating the potential impact on the project may be minimal. For example a huge storm could happen and cancel few flights. Thats a risk that unlikely to happen. For exam ple a meteor shower might hit a certain area on earth and that would cause the same effect as the previous example, but its becalm unlikely to happen or it doesnt happen too often if I may say. chance scale After determining the risk, prioritizing and categorizing them, its right off time to coiffe them on the probability scale or the possibility scale Very unlikely, unlikely, possible, likely, most likelyAfter measuring how serious and likely the risk would happen, its now time to see how influential and impacting the risk is. Using the impact scale which goes as following Very Low, Low, moderate, high, very highThe techniques and the methods used to rank a risk applying probability scale and impact scaleIdentifying the risk that is most likely to happen, rank it 5.Identify the risk that is the least likely to happen, rank it 1. regularize the other risks according to how likely they may occur.Apply the previous method on the impact scale.Example no.1 flightRisk snow stormProba bility3 electrical shock 5Priority Actions Example no.2 Flight RiskMeteor showerProbability1Impact5Priority Actions designing priority Once the probability and impact have been determined, you can easily calculate the priority by multiplying its probability through its impact. By this method you should be able to reorder your risk list in order of your own priorities.Example no.1 flightRisk snow stormProbability3Impact 5Priority 15Actions Example no.2 Flight RiskMeteor showerProbability1Impact5Priority 5Actions As we mentioned earlier that each environment has its risks and each situation has a set of risks. This leads us to our next point. estimate typifys the definition of hazard maps (Earthquake.usgs.gov, 2017) A hazard map is a highlighted map spotting dangerous areas that affected or vulnerable to a certain hazard or risk such as volcanoes, earthquakes, tsunamis, landslides etc.. Hazard maps are created and used too often to expose the areas of high risk however hazard maps h as various uses. For example the one created by the U.S Geological resume which is used by American Insurance Agencies in order to maintain insurance covered citizens safe for living in hazardous areas. This leads us to a very important point which is event history.Event history The only purpose of event history is to record, analyze and explain why certain large number are at higher risks than others. This can be done by a special sort of static methods depending on the matter which is discussed. The first mavin requirement to make an event history analysis is event history entropy.The definition of event history (members.home.nl/, 2017) Its simply a static or a series of events recorded by the date and time which happened to an individual or a series of individuals. For Example an event history might be constructed by asking a series of question to a sample of people or making a survey which will report the dates of any quondam(prenominal) changes in marital status (for examp le). Risk appetite A way to help and lead an organization organization to approach risk and risk management. The definition of Risk appetite (theirm.com, 2017) Its the amount of risk that a certain organization is able to tolerate and accept in the quest of its objectives and before the action is considered necessary. This done to reduce the risk since it works as a balance between the perks of creativity and the risk that change inevitably brings.Levels of Risk appetite Averse Avoiding risk and uncertainty. Minimal tendency to maximum safe options that is low on risk for a limited reward. Cautious tendency to safe side options that have a minimal degree of risk and may have limited potential for a reward. Open Willing to consider all options, the safe side mapping and the risky side as well and choose the one most likely to give better results. Hungry eager to be innovative and free to take the risks by choosing options with higher or better rewards despite the obvious risk, howe ver the risk could be reduced by measuring the odds, though microscopic measurement isnt always possible. By defining the risk appetite an organization can make a perfect balance between innovation and monish for better results and higher, safer profits. However if a risk occurred and it already happened well need to use methods called Risk manipulation.The definition of risk treatment (simplicable.com, 2017) A risk treatment protocol or method which simply shows you how to manage a risk process all of its contents and treat it with various solutions.Avoidance The first way to solve a problem is to avoid it and not needing to deal with it which in this case not taking the risk at all by avoiding its actions and staying out of its direction for a safe result.Reduction You can always stay safe, always be prepared for the risk, for example wearing a life chapiter when you go out for a swim, that way you will reduce the risk of drowning.Risk acceptance Also known as risk retention w hich is simply choosing to take the risk instead of avoiding it.How to assess the risk? (Gov.uk, 2017) There are few things you need to know if you want to assess the risk.1st you need to identify the risks and the hazards such as we mentioned before. 2nd you need to know who would get harmed by these hazards. 3rd evaluate the risks. 4th record your researches and studies about the risk. 5th review your judgement to make sure that everything is going as planned.Risk management process 1st youd need to identify the hazards as usual and make sure that you study all the sides of these hazards. 2nd risk identification youd want to be fully aware of the risk and the hazards caused by it. For example Hazard worn out wires on electric items. Riskworker might get electrocuted. 3rd risk assessment as its really importantto evaluate the odds of an injury occurring along with the possible consequences. Thats why risk assessment is based on two factors.The possible impact of any injury caused by a hazard and the possibility that the injury will happen, a risk matrix should be used in this type of situations.Risk Matrix (Brighthub Project Management, 2017) Is a matrix used during the risk assessment to categorize the various levels of risk and the amount of harm that can be predicted to happen during a specific event an accident. Forexample, the level of risk could be measured and calculated as the result of possibility that harm could occur multiplied by the severity of that harm. Catastrophic Numerous Deaths.Critical 1 Death or Several Severe Injuries. borderline 1 Severe Injury or several(prenominal) Minor Injuries. Negligible 1 Minor InjuryNegligible Marginal Critical Catastrophic Certain High High Extreme Extreme Likely split up on High High Extreme Possible Low Moderate High Extreme Unlikely Low Low Moderate Extreme RareLow Low Moderate High 4th risk control (riskcontrolstrategies.com, 2017) Urgent actions must be taken for risk assessed as critical or high risk , the actions include Instructions for contiguous cessation of Activity, Isolation of the hazard, Prioritizing and immediate reacts to the hazard along with few improvements that can be done quickly, Training workers to be able to deal with the hazard properly and finally Daily check on the hazard to prevent any catastrophic losses.5th branch diagrams (risk diagrams) (smartdraw.com, 2017)This analysis method is often used in safety engineering to fancy out and determine how system can break or fail to analyze how to reduce risk or determine rates and statics of safety accidents. And its ordinarily used nuclear powers and chemicals processing. Fault tree analysis can be used to understand the concept to the risk event. First Show the guidelines with the input system safety. Second Prioritize the circumstances leading to the hazard event. Third Monitor and insure safer performance. Fourth Control over resources. Fifth Assist building a system and a matrix. Sixth Diagnosis and ident ifying and avoid the causes of the top event.6th Risk register (Brighthub Project Management, 2017) National risks register Is a national warrantor strategy was first published by the government back in 2008. Aiming to provide advices on how people and business can stay safe by preparing themselves for civil emergencies, there was another update in January 2012 and it was a fulfilling update to the 2008s register. Such register contained all the governments likelihood and potential emergencies risks made by several emergencies and hazards according to natural and industrial occurring hazards that may affect the United Kingdom.2. Local risk Register Whatever risk we face daily, it depends on where we live, how we live and the nature of environment around us. Flooding for example will be limited to certain areas of the country, while the odds of an industrial risk will depend on the type of industry and the place each area has its own set of risks. For example living by the coast cou ld put you at the risk of a tsunami or a flood. Each area is special when it comes to risks. Therefore, the government provides guidance and instructions on how to act or what to do during this kind of events. It also shows how to castigate and how to treat these risks and how to be prepared before any risk hits suddenly.7th Dynamic Risk Assessment (KPMG, 2017) DRA was developed by KPMG aggroup A team of scientists, mathematicians and economists. Its considered a huge step forward in the risk Assessment field which depends on theories, sophisticated algorithms, mathematics and advanced well processed data to identify and analyze risk in a 4th dimensional view. This allows professionals to see where risk can be considered critical or even crack contagion. The threat is measured and calculated before the event to prevent its occurring.References BusinessDictionary.com. (2017). When was the last time you said this?. online Available at http//www.businessdictionary.com/definition/ris k.html Accessed 22 Mar. 2017.KPMG. (2017). Dynamic Risk Assessment. online Available at https//home.kpmg.com/xx/en/home/services/audit/dynamic-risk-assessment.html Accessed 22 Mar. 2017.Imagineeducation.com.au. 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