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Crisis management - dealing with risk

Risk management The identification and acceptance or offsetting of the risks threatening the profitability, or even the existence, of an organisation A plan for back up procedures, emergency response and post disaster recovery The process of responding to an event that might threaten the operations, staff, customers, reputation or the legal and financial status of an organisation. The aim is to minimise the damage

Contingency planning

Crisis management

Risk Risk is:


The possibility of incurring misfortune or loss A threat that an event, action or failure to act will adversely affect an organisations ability to achieve its business ob ectives and execute its strategies effectively The chance of something happening that will have an impact on ob ectives

How risk differs from uncertainty


Risk is defined as the chance or probability of danger, loss, in ury or other adverse conse!uence "ncertainty is #not knowing $or not known%, unreliable, changeable or erratic&. The result could be adverse

The difference is that:


'n the case of risk, a measure of probability can be attached to the various outcomes 'n the case of uncertainty, the probabilities of an event happening are too vague to !uantify

Options for dealing with risk


'gnore it ( adopt a wait and see approach Avoid or reduce risk ( reduce probability of risk Reduce or limit the conse!uences

)hare or deflect the risk e.g. by insurance *ake contingency plans ( prepare for it Adapt in order to maintain performance Treat it as an opportunity( if it affects competitors, then flexibility leads to competitive advantage *ove to another environment

[adapted from D. Waters, Operations Strategy] Risk management Risk management involves:

The identification of where and how things can and might go wrong Appreciating the extent of any downside if things go wrong +evising plans to cope with the threats ,utting in place strategies to deal with the risks either before or after their occurrence

Key elements of risk management


An on(going process for identifying, evaluating and managing significant risk Annual process for reviewing the effectiveness of the system of internal control A process to deal with the internal control aspects of an significant problems An embedded system in all the activities of the organisation and forms part of its culture A system for responding !uickly to evolving risks ,rocedures for reporting any significant control failings to appropriate levels of management

Probability-impact matrix

Risk-performance trade off

Minimising the risk