Risk ManagementUniversity of Economics, Kraków, 2012 Tomasz Aleksandrowicz
media monitoring: current risk events(27 Feb - 4 Mar)
What is risk management (RM)• protecting the organization from loss through avoiding the downside• process where organisations methodically address the risks attaching to their activities with focus of identification and treatment of these risks• address relationship between risk, growth and return• central part of any organisation’s strategic management
Framework, Process andPrinciples of Risk Management based on ISO 31000:2009 Principles and Guidelines on Implementation
Risk management definitions• Risk owner – person or entity with the accountability and authority to manage a risk• Risk attitude – approach to assess and eventually pursue, retain, take or turn away from risk• Risk appetite – level of risk that an organization is prepared to accept• Risk management policy – statement of the overall intentions and direction of an organization related to risk management• Risk management plan – approach, the management components and resources to be applied to the management of risk
Framework of RM Relationship between various components of the risk management framework
RM Framework (I)• Mandate and commitment: – continuous process, not one-off project – mandated from the Board (or equivalent), – implemented by senior management – supported by all levels of management and risk owners• Design of framework for managing risk: – formulating a risk management policy – designing processes – assigning resources and responsibilities
RM Framework (II)• Implementing risk management:: – communication with risk owners – ensuring risk management activities take place – Ensuring decisions and business processes factor risk approach• Monitoring and review: – confirmation that RM si working properly – gaps identification and remediation• Continual improvement
Principles of risk management (I)• should create and protect value• integral part of organizational processes• part of decision making• addresses uncertainty by defining possible risks• systematic, structured and timely• based on the best available information
Principles of risk management (II)• tailored to organization’s stakeholders, context and risk profile• takes human and cultural factors into account• includes stakeholders impact on organization• dynamic, iterative and responsive to change• facilitates continual improvement and enhancement of the organization
Establishing the context• external factors analysis (e.g. political, economic, social, etc)• alignment with internal factors such as strategy, resources and capabilities• strategic analysis tools used: – PEST / PESTEL (also SLEPT) analysis
PEST / PESTEL analysisPolitical Economic Socialpolitical stability economic growth cultural & religious factorsgovernment activities interest rates demographicstaxation currency exchange rates social trends & fashiontrade & tariffs policy inflation rate health & safety consciousnesslabour policy government spendingindustry specific regulationsTechnological Environmental LegalR&D activity weather factors consumer lawautomation climate change competitive and antitrust lawrate of technological change environment awareness employment regulationstechnology incentives health and safety law.
RM processEstablishing the context Ryanair case
summary• public company listed on ISEC, LSE and NASDAQ, HQ in Dublin• 2011 revenue 3,6 billion euro, net income 375 million euro• 72 million passengers in 2011 (up 10% from 2010)• 178 destinations (Europe, North Africa), plans for US (2014)• operates over 280 Boeing 737-800 aircraft• Low-cost business model (low initial price with paid add-ins, secondary airports, limited customer service)• aggressive marketing incl. price marketing, huge competition
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