Insurance can be an effective and efficient way to handle risk when it is used in a well-constructed fashion. The board will want to consider high-level issues such as:
A way in which the board can judge the merit of the answers to these questions is to find out:
There are, undoubtedly, other questions that the board may need to ask. These are an excellent starting place for getting a sense of how well the organization is addressing risk.
A risk assessment is simply a careful examination of what, in your work, could cause harm to people, so that you can weigh up whether you have enough precautions or whether you should do more.
As an employer or self-employed person, you must do a risk assessment but you only need to record it if you employee five or more people.
A safety method statement is not required by law. It describes in a logical sequence exactly how a job is to be carried out in a safe manner and without risks to health. It includes all the risks identified in the risk assessment and the measures needed to control those risks. This allows the job to be properly planned and resourced.
Safety method statements are most often found in the construction sector. They are particularly helpful for:
Whether safety method statements are used or not, it is essential to make sure that risks are controlled.
If managing risk is really important to the organization, the individual performance plans of a large number of employees at different levels of the organization should include a specific objective or task related to risk management. Thus, the performance against these would be evaluated at regular intervals. It is well-known that what gets measured gets managed, and what gets rewarded gets attention.
To provide input to executive management regarding critical risk issues on a timely basis, directors must understand the business and industry, as well as how the changing environment impacts the business model.
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A robust process for managing and monitoring each of the critical enterprise risks is essential to successful risk management, and risk management capabilities must be improved continuously as the speed and complexity of business change.
These should be top of mind for the organization’s senior team at all times and be a familiar topic of discussion with the board. Board members should consider if these make sense based on all the information they have been privy to about the organization.
Strategic and non-strategic risks of a certain magnitude should be combined into one risk register that allows management and the board to see:
The board should expect to see such a report or ask for one, if it is not already being created.
Once the key risks are targeted, someone or some group, function or unit must own them. Gaps and overlaps in risk ownership should be minimized, if not eliminated.
Clear accountability for the task of ensuring IT security is also critical. With the risk of cyber breaches, demands for service, extortion and stealing of bank accounts and intellectual property so high, an organization needs to ensure it has the necessary expertise to create a secure technological platform. This can be in the form of hired staff or expert contractors.
In the case of some recent, high-profile breaches, it appears that the role of chief information security officer (CISO) was either non-existent or that the individual filling the role was brand new. An inference can be drawn that a seasoned CISO who understood the organization might have made a difference.
Of course, having the role filled does not guarantee never having a security risk come to fruition. But it does reduce the risk to some extent, and having a CISO makes the discovery and recovery from a breach or attack quicker and more efficient when one does occur.
The enterprise wide risk assessment process should be responsive to change in the business environment. A robust process for identifying and prioritizing the critical enterprise risks, including emerging risks, is vital to an evergreen view of the top risks.
Yes, if you are an employer or self-employed. It is a legal requirement for every employer and self-employed person to make an assessment of the health and safety risks arising out of their work. The purpose of the assessment is to identify what needs to be done to control health and safety risks. Regulation 3 of the Management of Health and Safety at Work Regulations 1999.
Given that failures are generally caused by a strategic risk that has not been addressed rather than by a catastrophic storm or single cyber attack, for example, it is vital for organizations to know and deal with their strategic risks.
Strategic risks typically involve aspects of the business such as:
Andrew has joined as the Project Manager of a project. One of the project documents available to Andrew lists down all the risks in a hierarchical fashion, this document is called Risk Breakdown Structure.
As an employer or a self-employed person, you are responsible for health and safety in your business.
You can delegate the task, but ultimately you are responsible. You will need to make sure that whoever does the risk assessment:
Does the company have response plans for unlikely extreme events? Has it prioritized its high-impact, low-likelihood risks in terms of their reputational effect, velocity to impact and persistence of impact, as well as the enterprise’s response readiness?
Large and small organizations, alike, have the potential to harbor correlated risks. Correlated risks are a group of risks that might occur at the same time because there is a relationship of some sort among them. The aspect at play could be:
A correlation might also be in terms of chain reactions. One risk event may give rise to other risks, which is often true in the case of natural disasters such as earthquakes and hurricanes.
A question about correlated risks will not only elicit an answer about those risks but also provide insight as to whether risk is being discussed in depth and across organizational silos.
A company can fall so in love with its business model and strategy that it fails to recognize changing paradigms until it is too late. While no one knows for sure what will happen that could invalidate the company’s strategic assumptions in the future, monitoring the validity of key assumptions over time as the business environment changes is a smart thing to do.
Beta needs to refer to the Risk response plan that documents responses to identified risks.
No matter how robust a risk management process is, a company will experience catastrophes of one sort or another from time to time. There is a need for plans that deal with these because reaction speed is critically important in managing them well.
The business continuity plan has the aim of keeping all or some of the business running from another venue or with back-up systems or on-call staff, or whatever allows continuous operations. The disaster recovery plan has the mission to restore normal operations as quickly as possible after the business has been interrupted in whole or in part.
In reviewing these plans, key elements to look for include:
Risk probability and impact are defined during Qualitative risk analysis.
Without assigning someone clear accountability for the process of risk management, it is unlikely that risks would be identified, prioritized and mitigated across an organization on a periodic basis and in a thorough way. In addition, it is unlikely risk would be given the focus that is required to achieve a reasonable degree of control over the many uncertainties facing organizations in today’s highly dynamic marketplace.
Less important are such details as the title of the individual with the accountability or how large a budget or staff the individual is provided. A named, accountable person is key to ensuring that a sound process is in operating.
Risks should be reduced to the lowest reasonably practicable level by taking preventative measures, in order of priority. This is what is meant by a hierarchy of control. The list below sets out the order to follow when planning to reduce risks you have identified in your workplace. Consider the headings in the order shown, do not simply jump to the easiest control measure to implement.
Most businesses will not need to use risk matrices. However, they can be used to help you work out the level of risk associated with a particular issue. They do this by categorising the likelihood of harm and the potential severity of the harm. This is then plotted in a matrix (please see below for an example). The risk level determines which risks should be tackled first.
Using a matrix can be helpful for prioritising your actions to control a risk. It is suitable for many assessments but in particular to more complex situations. However, it does require expertise and experience to judge the likelihood of harm accurately. Getting this wrong could result in applying unnecessary control measures or failing to take important ones.
The risk appetite dialogue helps to bring balance to the conversation around which risks the enterprise should take, which risks it should avoid and the parameters within which it should operate going forward. The risk appetite statement is decomposed into risk tolerances to address the question, “How much variability are we willing to accept as we pursue a given business objective?” For example, separate risk tolerances may be expressed differently for objectives relating to earnings variability, interest rate exposure, and the acquisition, development and retention of people.
Significant risks are those that are not trivial in nature and are capable of creating a real risk to health and safety which any reasonable person would appreciate and would take steps to guard against.
What can be considered as 'insignificant' will vary from site to site and activity to activity, depending on specific circumstances.