Risk description training 22_dec12
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This document provides an overview of enterprise risk management. It defines risk and discusses how to write effective risk descriptions with three elements: cause, risk event, and consequence. It also covers what a risk register is and how it can be used to track risks. Finally, it lists several techniques for identifying risks, such as brainstorming, questioning assumptions, and reviewing historical data. The overall document aims to introduce the key concepts and processes involved in enterprise risk management.
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Risk description training 22_dec12
- 1. Enterprise Risk Management Enterprise Risk Management Risk Description Training
- 2. Enterprise Risk Management Introduction & Objectives What is risk? How to write risk descriptions? What is risk register? How to identify risks?
- 3. Enterprise Risk Management Introduction & Objectives What is risk? How to write risk descriptions? What is risk register? How to identify risks?
- 4. Enterprise Risk Management What is Risk ? “effect of uncertainty on objectives” (ISO 31000:2009) “Any uncertain event or set of circumstances that, should it occur, would have an effect on one or more objectives” (Association for Project Management 2004) chance of something happening have an impact on objectives” “the (AS/NZS 4360:2004) INDIA (3) that will
- 5. Enterprise Risk Management Risk and Objectives: Risk is not the same as uncertainty. Risk arises when uncertainty has the potential to affect objectives. There are uncertainties that cannot affect objectives, and which are therefore not risks.
- 6. Enterprise Risk Management Risk versus Reward: Risk and Reward are two sides of the same coin.
- 7. Enterprise Risk Management Positive Risks • Increased business opportunities • Reduction in the maintenance cost Negative Risks • Loss of key resources • High staff turnover • Poor talent management
- 8. Enterprise Risk Management Introduction & Objectives What is risk? How to write risk descriptions? What is risk register? How to identify risks?
- 10. Enterprise Risk Management Risk Description As a result of (Definite cause), (an uncertain event/risk) may occur, which would lead to (an impact on objectives) Cause Risk event Consequence Improper server maintenance may result in failure of SAP server and loss of data which would lead to business interruption.
- 11. Enterprise Risk Management Technical As a result of band screen choke, all sea water intake pumps will trip, leading to plant black out. HR As a result of high staff turn over, production and quality will get affected, leading to loss of revenue. Finance Delay in payment may cause vendors to stop supplying chemicals, leading to plant shutdown. SCM Insufficient purchase specification may result in inappropriate product procurement which will affect quality requirements. Risk Description Examples Cause Risk event Consequence
- 12. Enterprise Risk Management Risk Event 1 2 consequence Cause Risk Description 1 Comments All elements present / Needs Improvement Risk Description 1 Comments All elements present / Needs Improvement Risk Description Activity 1. Identify 2 risk events in your area 2. Determine the consequence and causes 3. Describe the risk in the box Cause Risk event Consequence
- 13. Enterprise Risk Management Good risk descriptions shall have at least these 3 elements. Cause Which reason will trigger the uncertain event? Risk event Which uncertain event can go wrong and how? Consequence Which objective will be affected and to what extent?
- 14. Enterprise Risk Management An indication that a risk has occurred or is about to occur. They sometimes are called risk symptoms or warning signs. Triggers may be discovered in the risk identification process and watched in the risk monitoring and control process. RISK TRIGGER
- 15. Enterprise Risk Management Causal taxonomy of risk
- 16. Enterprise Risk Management Flood risk from the householder perspective
- 17. Enterprise Risk Management Interchangeability of concepts depending on perspective
- 19. Enterprise Risk Management Introduction & Objectives What is risk? How to write risk descriptions? What is risk register? How to identify risks?
- 22. Enterprise Risk Management Function Name Control Number Process Name Controls Risk Category Risk # Risk Description Link to Entity Risk Register Control Attributes Manual / Automated / Both Preventive / Detective Frequency Control Rating Inherent Risk Impact Residual Risk Impact Inherent Risk Likelihood Residual Risk Likelihood Inherent Risk Rating Residual Risk Rating Risk Response (Mitigation Plan) Risk owner RISK REGISTER Timeline
- 23. Enterprise Risk Management A B / X Y Z / $ - 001 Risk/Control Number Company Plant Function OPN Operation MTC Maintenance PLG Planning Expansion R Risk QAC Quality Assurance and control C Control Q SQIWPP IMS Integrated Management System B Barge SCM Supply Chain Management Y Qurayyah HRD Human Resource Development HSE Health, Safety & Environment R Rabigh FIN Finance & Accounting J Jeddah office ITC Info. Tech & Communication LGL Legal & Contracts CBD Commercial & Business Development N NOMAC C Corporate R ROMCO S SIWPP S SunE NOMAC E Risk/Control Risk/Control Coding System
- 24. Enterprise Risk Management NOMAC – Entity Risk Register Sl. No. Risk Description Sl. No. 1 Organization Scalability & Business Readiness Risk 14 Regulatory & Environment Risk 2 Bid Management Risk 15 Technical Planning Risk 3 Design & Redundancy Risk 16 Procurement Planning Risk 4 Construction Risk 17 Procurement Efficiency Risk 5 Mobilization, Training & Handover Risk 18 Inventory & Warehouse Management Risk 6 Maintenance Risk 19 Warranty Management Risk 7 Unplanned Outage Risk 20 Manpower Planning Risk 8 Quality Management Risk 21 Recruitment and Retention Risk 9 Contractual Risk 22 Challenges resulting from Saudization Targets 10 Business Management Risk 23 Working Capital Risk 11 Integration Challenge Risk 24 Information for Decision Making Risk 12 Commodity Risk 25 Accounting & Reporting Risk 13 Health & Safety Risk 26 Information Technology Risk Risk Description
- 25. Enterprise Risk Management Risk Assessment Criteria Matrix IMPACT Scor e 5 4 3 Rating Critical Significan t High Financial Impact (SAR) LIKELIHOOD Organizational & Operational Scope Reputation & HSE Impact Score Rating Certainty Frequenc y 5 Expected > 90% Often Permanent disability Loss of trust of partners Trend of adverse events Inefficient crisis management - National reputation impact 4 Highly Likely < 90% 3-4 times a year > 15 Mn - Inability to continue normal business operations (e.g. Catastrophic failure, termination etc) - Non compliance to environmental regulatory requirements. - Fatality - Failure to obtain, maintain and renew approvals required under the law - International reputation impact 10 to 15 Mn - Extended unplanned Availability losses. - Heat Rate / Specific power consumption in excess of contracted values for an extended period. - Loss of multiple key resources. - 7 to 10 Mn - Unplanned Availability losses in excess of contracted values. - Heat Rate / Specific power consumption in excess of contracted values. - Loss of 2-3 key resources. - Disputes with off-taker / Project Company - Major Injury/Major ill health - Isolated adverse events - Considerable reputation impact 3 Likely <60% Less than 2 times a year - Unplanned Availability losses within contracted values. - Heat Rate / Specific power consumption in excess to the projected values - Loss of key resources. - Minor Injury/Minor ill health - Non compliance to regulatory requirements (other than environmental). - Limited reputation impact 2 Slightly <30% Once a year 1 Not Likely <10% 3 Years and Beyond 2 Moderate 3 to 7 Mn 1 Low <3 Mn Slight Impact
- 26. Enterprise Risk Management Responsive Action Map Control Effectiveness Risk Rating 1 - Excellent 2 - Good 3 - Fair 4 - Poor 5 - Unsatisfactory 5- Critical 4- Significant 3- High 2- Moderate 1- Low Immediate attention required to develop new mitigation plans so as to ensure treatment level is acceptable Effectiveness and efficiency to be reviewed on periodic basis Document exist for mitigation plans. Regular monitoring of risk and/or treatment required along with review of efficiencies and effectiveness. Risks are mitigated but efficiencies and effectiveness to be reported on periodic basis Attention required to ensure appropriate level of mitigation controls are in place and review of effectiveness to be carried out on periodic basis
- 28. Enterprise Risk Management Introduction & Objectives What is risk? How to write risk descriptions? What is risk register? How to identify risks?
- 29. Enterprise Risk Management Your own experience Ask yourself “What-if” questions Challenging and questioning assumptions Thinking wider than the known facts Expert and specialist judgment Audit findings Historic data and future trends Critical path analysis Scenario planning Root cause analysis One to one interviews Anonymous questionnaires HOW TO IDENTIFY RISKS? Team Brainstorming Structured discussions & Workshops
- 30. Enterprise Risk Management This is not the end but just the beginning of Risk Management… Thank you !