Risk Management
“A ship is safe in harbour, but that’s not what ships are for”
Content
• Objectives of the course
• What is risk?
• What is risk management?
• Types of risk
• Two-dimensional risk
• Generic Risk Process
• Best strategies for treating the risk
Objectives
After the training session, the entrepreneurs will be able to:
• Define risk
• Define risk management
• Types of risk
• Understand & carry out the risk management steps
• Devise proper strategy to treat risks
What is risk?
• An uncertain event and condition which if happens affect the mission
objectives
• Risk is uncertainty that matters i.e. not all risks are relevant to our
enterprise
• It could have a positive and a negative effect (We have good risk and
bad risks)
• Risk includes both opportunities and threats
What is risk management?
• Risk management is the identification, assessment, and prioritization
of risks or uncertainties followed up by minimizing, monitoring and
controlling the impact of risk realities or enhancing the opportunity
potential by applying coordinated and economical resources.
• Risk management is essential in any business. It lays foresight for
returns on investments and projects all potential backlash a company
could face by starting a new (or even routine) endeavor.
Two dimensional risks
Risk has 2 dimensions:
1. Uncertainty 2. Effect on objectives
Types of risks
Illustration 1
• Mrs Sandrine wants to develop a new cleaning product for household.
Uncertainty
–Will the product be saleable on the market?
Objectives
–To sell 100 cleaning products per month.
Risk
– The product might not appeal to the customers
Here, under this scenario Mrs Sandrine should manage the risk.
How??
_Before developing the new product, she should carry out market research, understand the need of the market
Generic Risk Process
1. Define
objectives at
risk
6.Monitor 2. Identify
and review risks
5.Implement
3. Assess
risk
risks
responses
4.Plan risk
responses
Identify the risk
• Risks include any events that cause problems or benefits. Risk identification
begins with the sources of internal problems and benefits or those of
competitors. Risks can be internal or external, so software can be used to identify
the wide range of risk possibilities.
What are the Hazard
Analyse the risk
• Once you have identified risks, you can thoroughly analyze the
potential effects that each will have on consumer behavior, your
company and other current endeavors.
Evaluate the risk
• Now you can assign a ranking quality to the likelihood of each risk’s
outcomes. This will help paint a picture around how severely a risk
threatens a project or new product. You can also determine the
magnitude that each risk potentially carries to destroy or support a
new tactic. The magnitude is a combination of the risk likelihood and
consequence.
Treat the risk
• Since you have a grip on all possible risks and their severity, you can
begin to treat the worst risks first. You’ll first want to look at the ways
you can reduce the probability of a negative risk and then how to
increase the probability of a positive opportunity. At this stage of risk
assessment, preventative and contingency should be prepared so that
there are no surprises as your move forward with action plans.
Monitor the risk
• By now, you know your risks, their likelihood, what will happen if they
occur and how to go about defusing any disaster that arises. What
next? Monitor the risks by tracking involved variables and proposed
possible threats to chain reactions. As your tracking system identifies
changes, calmly treat the rising problem to avoid widespread ripple
effects and the triggering of a big risk.
• This brings us to the next important wave of risk management: treating
the risk. There are several ways to treat risk, and they all depend on
what type of risks are being treated and how serious those risk’s
repercussions or opportunities are. Let’s take a look at the techniques.
Best Strategies for treating the risk
• Avoidance
Best case scenario, you can avoid risk repercussion altogether. But in forfeiting
all activity that carries risk, you also forfeit all associated potential return and
opportunity. It is up to you what type of risk activity you want to play with
• Risk reduction
Implements small changes to reduce the weight of both risk and reward post-
event. The reduction will require some process and plan manipulation, but it
will save your company from a severe loss in the case of a high-risk
manifestation.
Best Strategies for treating the risk
• Sharing
Risk sharing or transferring redistributes the burden of loss or gain over
multiple parties. This could include company members, an outsourced
entity or an insurance policy.
• Retention
Risk retention involves assuming the loss or gain, entirely. This option is
best for small risks where the losses can be easily absorbed and made
up.
