Title: RISK ASSESSMENT ROAD MAP
1RISK ASSESSMENT ROAD MAP
2What 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.
3Why 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.
4Where to Start?
- What is the specific activity?
- Who
- What
- When
- Where
- How
- Why
5The 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.
6What 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.
7What 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.
8What Values are Exposed to Loss?
- People
- Property
- Freedom from liability (alleged wrong doing)
9What Types of Perils Cause Loss?
- Natural
- Flood
- Wind
- Earthquake
- Human
- Arson
- Vandalism
- Graffiti
- Economic
- Changes in the stock market
- War
- Increases in material costs
10What About the Financial Consequences?
- The point Making sure you dont give away the
farm.
11How 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
12What 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
13Rating 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?
14Rating the Severity of Loss Exposures
15What is the Likelihood?
16Determine a Risk Rating
17Dont 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.
18Weighing the Value of Opportunities
19Risk 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.
20What 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.
21Risk 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.
22Risk 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?
23Immunities 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?
24Evaluation 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?
25If 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.
26How will the agency pay for losses resulting from
the activity?
27What 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.
28One 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.
29The End