Whitepaper on Risk and Risk Management December 2009 Markus Aeschimann www.mindarea.ch / [email_address]
Definition of Risk <ul><li>Uncertainty that influences the achievement of objectives in a negative or positive way. </li></ul><ul><li>Elements included in this definition: </li></ul><ul><li>Looking into the future </li></ul><ul><li>Influencing factors that are not known or difficult to identify and assess </li></ul><ul><li>Consequences in relation of achievement of an objective </li></ul>December 2009 Markus Aeschimann
Linkage between Opportunities, Objectives and Risks December 2009 Markus Aeschimann The external environment is the source for opportunities or threats. Combined with internal strengths or weaknesses and the decision to respond to them, this creates uncertainty, i.e. business opportunities or risks. When taking decisions, objectives are set, either to exploit a specific business opportunity, or to mitigate a specific risk. However, a risk is always to be assessed in relation to a specific objective. Environment (Economy, Society, Technology, Ecology) Opportunities Threats Business Opportunities Risks Strengths Weaknesses Risks, that objectives can not be reached Objective (to exploit business opportunity) Objective (to reduce risks)
The more Philosophical Approach to Risks based on Decisions December 2009 Markus Aeschimann Environment Opportunities Threats Business Opportunity Risk Strengths Weaknesses Decision Objective to exploit Business Opportunity Action Action Action To turn a generic Opportunity into a specific Business Opportunity, a Decision has to be taken (considering internal and external factors) Risk(s) of not achieving the Objective Based on the Decision taken, external Threats and internal Weaknesses turn into Risks Objective Actions to achieve Objective
Risk Management Explained on the Example of a Student December 2009 Markus Aeschimann Firstly, a goal has to be set, here it’s passing the Masters exam. Then, possible risks are identified and analyzed to create transparency. Evaluating the risks according to impact and likelihood allows a prioritization and selection of the appropriate risk management strategy. At the end, manage the risks by planning and implementing adequate actions.