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EFFECTIVE RISK
STRATEGY
PROFI
PT
R O F IT
-L O IS
LSOKS S
6. Avoidance
R
I
S
K
7. Mitigation
1. Understand the
business
strategy
2. Define
risk
tolerance
3. Identify &
assess
major risks
achieving
business
strategy
4. Model
loss
frequency
and
severity
5. Quantify
total cost of
risk for
priority
risks
8. Retention
Balance
Sheet
Captive
9. Transfer
Insurers
Capital or
other Markets
S
T
R
A
T
E
G
Y
I
M
P
L
E
M
E
N
T
A
T
I
O
N
Protects brand
Reduces hedging,
insurance and
litigation costs
Reducing Investor
=
Discount Rate
Strengthens credit
rating
Reduces capital
costs
Increased
Company Value
DIFFICULT TO MEASURE
Financial
Strategic
Operational
Regulatory/Compliance
Technology
Sustainability
Reputational
Supply Chain
Talent/Human Capital
IN HOUSE
EXPERTS
YES
LIMITED
SECONDARY
MARKETS
YES
LIMITED
Underlying
Vulnerability
Over-commitment of
resources and capital in new
business development; poor
internal communication
between technical and sales
functions; lack of integrated
IT system
Trigger
Inability to meet customer
support expectations
Consequences
Loss of technical leadership
in the market, organizational
stress, loss of profit
GETTING STARTED
On-line questionnaire
Risk Assessment
Techniques
Structured interviews
Workshops
PROPRIETARY TOOLS
AND PROCESSES
LossPIQSM
RAPIDSM
(Risk Assessment Impact & Probability Diagnostic)
Features
Comprehensive assessment of risks to achieving goals &
objectives
Accelerated format
Minimizes participant time demands
Surfaces unforeseen/emerging risk
RAPIDSM DELIVERABLES
Risk Register
Risk Assessment for :
Date:
Business Objective(s):
Sample Company
31-Jan-13
Assessment of the major risks affecting achievement
of Sample's business objectives during the next 3
years
Risk
No.
Underlying
Vulnerabilities
(Exposure)
1 Aging of critical machine
tools (close tolerance)
Trigger(s)
(Risks)
2 Significant increase in
tier 2 suppliers within
developing countries
Production disruption;
loss of profits; loss of
market share
3 Increasing percent of
Production/Throughput
new hires; location of
shortfall - due to error,
refinery 2 and platform A weather damage
Loss of revenue;
reputational damage;
customer dissatisfaction;
fail to meet contractual
obligations
4 Shortage of
experienced, qualified
technical sales &
distribution resources
5 Succession and
proactive outside talent
hiring plans impacted by
market economic
conditions
Retirement and
departure of skilled
personnel and
constraints of
development of bench
strength
Consequences
Cat
Category
Gross
Risk
Technology
20
Inventory management
Products /
Services
16
Products /
Services
16
Human
Resources
16
Human
Resources
15
RAPIDSM DELIVERABLES
Risk Distribution Charts
Likelihood / Impact Risk Distribution
Current Controls
N.B. - Bubble size shows how many risks intersect at that point
5
1
Likelihood
4
Likelihood
N.B. - Bubble size shows how many risks intersect at that point
0
0
3
Impact
Impact
RAPIDSM DELIVERABLES
Risk Categories
Analysis by Source of Risk
and Stratified by Risk Rank
Technology / Industry change
Strategy and policy
Products / Services
Processes
Political / Social
People
Natural events
Investm ents
Econom ic
0
20<RR<=25
15<RR<=20
10<RR<=15
5<RR<=10
RR<=5
RAPIDSM DELIVERABLES
Risk Matrix
'Risk Matrix' - Before and After Controls
Likelihood
Expected
Probable
Possible
10
Control Causes
16, 17, 22
Monitor
Unusual
Remote
1
Immediate Action
4, 5
2, 3, 4, 5
9, 11, 12, 13
8, 23
1, 2, 8, 9, 11, 13
23
Contingency Plans
18
12, 18
7, 14, 15
7, 14, 15
20, 21
19
20, 21
19
Negligible
Low
Moderate
Significant
Catastrophic
Impact
Risk Scores
Likelihood
Impact
Gross Risk /
Risk Rank
Before
Improvement
20 / 24
After Improvement
9 / 13
Consequences:
Current Controls:
5:
Before
Control
Causes
Immediate
Action
4:
Likelihood
Category:
Trigger(s)(Risks):
3:
After
Contingency
Plans
Monitor
2:
1:
1:
Responsible:
Timescale:
2:
3:
4:
5:
Impact
Scroll down to the next empty section and insert the risk number and description. This data becomes a permanent record for each risk
Risk Number:
Risk Description:
1
Costs
Responsible:
Target Date:
Last Updated:
Capital Cost
Budgeted?
(Yes/No)
Time Commitment
Budgeted?
(Yes/No)
Approved
(Yes/No)
Delivery (when)
Budget Cost
Budget time
Action
Deliverables
Measure of Success
Sr Mgmt
Allocated to
01-Dec-10
2 supervisor mentoring
3 hiring practices
4 training
5 accountability
6 review dist of duties
Team C
Team C
HR
Team C
Sr Mgmt
01-Jun-10
01-Jan-10
01-Jan-10
01-Mar-10
01-Mar-10
01-Jan-10
RAPIDSM TIMELINE
Week 1
Project Kick-Off
Agree Project
Scope
Workshop
Participant
Selection /
Scheduling
Data Search/
Document
Collection
Data/Document
Review
Interview Select
Personnel (if
needed)
Develop Draft Risk
Universe (75-100+
risks)
Week 2
Obtain Input/
Finalize Risk
Universe
Create Draft PreWorkshop eSurvey
Obtain Input /
Finalize e-Survey
Issue e-Survey to
Workshop
Participants
Week 3
Week 4
Week 5
Provide Draft
Workshop
Deliverables
Week 6
Obtain Input /
Risk Improvement Obtain Input /
Feedback on Draft
Planning
Feedback on Draft Report
Workshop (half
Workshop
Deliver Final RAPID
day)
Deliverables
Report
xie xie