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RISK ASSESSMENT ROAD MAP

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Weighing the Value of Opportunities. H. H. M. L. L. RARE. E. H. M. L. L. UNLIKELY. E. E. H. M. L. POSSIBLE ... to build a 'big book of risks.' One More Tool ... – PowerPoint PPT presentation

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Title: RISK ASSESSMENT ROAD MAP


1
RISK ASSESSMENT ROAD MAP
2
What is Risk Assessment?
  • A strategic approach to planning.
  • Occurs at all levels and across all functions of
    an organization.
  • Identifies exposures of activities.
  • Assists the organization in making risk-adjusted
    business decisions every day.

3
Why Do Risk Assessments?
  • Facilitates pre-planning, assessing and
    brainstorming about what can go wrong, resulting
    in mitigation strategies to manage what does go
    wrong.
  • Business decisions are made with eyes wide open.
  • Reaction time to an incident, disruptions in
    operations after an incident, and financial
    consequences arising from an incident may be
    mitigated or eliminated.

4
Where to Start?
  • What is the specific activity?
  • Who
  • What
  • When
  • Where
  • How
  • Why

5
The Million Dollar Question
  • What is your entitys appetite for risk?
  • Low with little tolerance for the unexpected.
  • Medium with understanding that service delivery
    requirements come with risk.
  • High where agency mission and operations do not
    leave the agency a choice.
  • Extreme where agency mission and operations
    dictate the appetite, or where risks have not
    been assessed or addressed.

6
What is Risk?
  • Risk Management Textbook Definition- The danger
    or probability of loss.
  • Project Definition - There may be external
    circumstances or events that cannot occur for the
    project to be successful. If you believe such an
    event is likely to happen, then it would be a
    risk.

7
What is a Loss Exposure?
  • The possibility of financial loss as the result
    of a particular peril striking a thing of value.
  • Components
  • The type of value exposed to loss.
  • The peril that caused the loss
  • The extent of the potential financial
    consequences of that loss.

8
What Values are Exposed to Loss?
  • People
  • Property
  • Freedom from liability (alleged wrong doing)

9
What Types of Perils Cause Loss?
  • Natural
  • Flood
  • Wind
  • Earthquake
  • Human
  • Arson
  • Vandalism
  • Graffiti
  • Economic
  • Changes in the stock market
  • War
  • Increases in material costs

10
What About the Financial Consequences?
  • The point Making sure you dont give away the
    farm.

11
How Can We Identify Exposures?
  • Previous activities of similar type and their
    outcomes lessons learned
  • Standardized surveys and questionnaires
  • Financial statements
  • Records and files
  • Loss Reports and claims
  • Flowcharts
  • Personal inspections
  • Experts

12
What Questions Should Be Asked?
  • What is the overall service or activity?
  • Who, what, when, where, how and why will the
    service or activity be performed?
  • Who or what could be harmed?
  • What could go wrong?
  • Bodily injury
  • Property Damage
  • Liability
  • Impact on systems or workload

13
Rating the Risks of Loss
  • Rate the severity of the risk of each potential
    loss exposure
  • How bad can each loss be?
  • What could it cost?

14
Rating the Severity of Loss Exposures
15
What is the Likelihood?
16
Determine a Risk Rating
17
Dont Forget About the Value of Opportunities
  • What opportunities will be missed if the activity
    is not done?
  • What is the upside and downside of these
    opportunities.
  • By considering the full range of potential events
    rather than just risks the risk assessment
    process ensures that management can identify and
    take advantage of positive events quickly and
    efficiently.

18
Weighing the Value of Opportunities
19
Risk Rating Level of Risk
  • E EXTREME RISK - Involve senior management
    immediately, emergency situation, consider not
    doing the activity.
  • H HIGH RISK - Management attention required for
    business and policy decisions, effective risk
    control, insurance types and limits, etc.
  • M MODERATE RISK - Management should be kept
    informed of risk control, insurance types and
    limits, etc.
  • L LOW RISK - Manage by routine procedures,
    insurance types and limits could be flexible.

20
What Tools Are Available to Manage the Risks?
  • Risk Control Methods
  • Avoid the risk altogether.
  • Prevent the frequency of loss.
  • Reduce the severity or cost of loss.
  • Segregate to prevent one event from causing loss
    to the whole.
  • Contractually transfer the risk.

21
Risk Control Measures Must Be Specific to the
Situation
  • Personal protective equipment.
  • Housekeeping, repair, and maintenance.
  • Inspections.
  • Tools and equipment.
  • Policies, procedures, and process.
  • Supervision.
  • Contract Management and Administration.

22
Risk Adjusted Business Decisions
  • Which measures best fit the mission, activity,
    and Risk Rating?
  • How can the measures be implemented?
  • Who will implement?
  • Who will be responsible for making sure the
    measures are followed?
  • Who will be responsible for ongoing monitoring?

23
Immunities Coverage
  • Do any statutory immunities apply to the
    activity?
  • What are the limitations and/or exclusions?
  • Does your agency have a legal opinion on
    statutory immunities?
  • Does self-insurance cover the activity and/or
    people?
  • If not, does management want to buy commercial
    insurance coverage for the activity?

24
Evaluation of State Self-Insurance or Commercial
Insurance Coverage
  • Which kinds of coverage apply and what are the
    limits?
  • What are the exclusions to the coverage?
  • Does the agency meet the reporting and loss
    control requirements of the coverage?

25
If Your Agency
  • Has no statutory immunity for the activity.
  • Has not decided to use loss prevention/risk
    control measures to minimize or mitigate the
    risks.
  • Has not contractually transferred the liabilities
    associated with the activity to another party.
  • Does not have self-insurance coverage for the
    activity.
  • Has not purchased commercial insurance coverage
    for the activity.

26
How will the agency pay for losses resulting from
the activity?
27
What is the Point?
  • Knowing the risks associated with your entitys
    operations that should be keeping you awake at
    night.
  • This insight provides your entity with the
    ability to plan for proactive loss prevention
    actions rather than just loss reduction
    reactions.
  • This process allows your agency to build a big
    book of risks.

28
One More Tool
  • Knowing the risks associated with your entitys
    operations that should be keeping you awake at
    night.
  • This insight provides your entity with the
    ability to plan for proactive loss prevention
    actions rather than just reactive loss reduction
    reactions.

29
The End
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