Introduction to

Risk Management
Developed by Dr IKRAM
UL HAQ CPA, PhD

4/5/17 Developed by Dr IKRAM UL HAQ CPA, PhD 1

 Risk

Developed by Dr IKRAM UL HAQ CPA, PhD
4/5/17 2
 What is
risk
Among many, two definitions of
risk are commonly used:
1. The variability in possible
outcomes around the average
2. Risk is the likelihood of losses
resulting from changing events
Are these two definitions
Developed different?
by Dr IKRAM UL HAQ CPA, PhD
4/5/17 3
the absence of certainty in a
future or current event defines the
risk of such event

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thus, standard deviation is an
appropriate measure of risk

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as the level of risk increases the
expected return should increase
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 Level of Risk = Level of Uncertainty

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doubt creates
uncertainty

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when it becomes difficult to predict the
Developed by Dr IKRAM UL HAQ CPA,
outcome of an specific event, uncertainty
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imperfect knowledge is therefor
the origin of uncertainty
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risk management is dependent on the
information that one has to evaluate the
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likelihood of outcomes and ones ability
PhD
Management
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 a structured approach to managing
uncertainty related to a threat

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a sequence of human activities including risk
assessment, strategies development to manage
it, and mitigation of risk using managerial
resources
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PhD
 risk management strategies include transferring the
risk to another party, avoiding the risk, reducing the
negative effect of the risk, and accepting some or all of
the consequences of a particular risk.
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Risks can be both internal arising
from within the organisation and
external arising from the context
Developed by Dr IKRAM UL HAQ CPA,
or environment of the organisation.
4/5/17
PhD
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risk management decreases obstacles to
achievement of corporate objectives,
growth and the maximization of
shareholders wealth
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effective risk management results in
more efficient risk-return trade-off
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risk management fundamentally supports
the core function of management
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Copyright 2012 Derek Hendrikz Consulting
risk
sources
,
events&
outcom
es
????? Developed by Dr IKRAM UL HAQ CPA,
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PhD
 Developed by Dr IKRAM UL HAQ CPA,
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 Possible sources of risk within
your organization:
Natural threats (lightning, drought, floods, etc.)
Environmental threats (competitors, markets,
etc.)
Business process threats (inefficient processes,
unproductive departments, etc.)
Information threats (outdated systems, no
knowledge management, etc.)
Decision threats (unqualified & unexperienced
management)
Safety hazards (slippery walkways, oil drums in
wood sheds, etc.)
4/5/17 Developed by Dr IKRAM UL HAQ CPA, PhD
Copyright 22
2012 Derek Hendrikz Consulting
 Possible risk events within
your organization:

Fire;
Accident;
Explosion;
Drop in market share;
Customer refusing to buy;
Etc

bound by specific time and place

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Possible risk outcomes within
your organization:
Damage or loss of assets;
Injury or death of people;
Financial loss;
Information loss;
Legal liability claims;
Loss of intelligence;
Loss of energy;
Failure to achieve organisational
outcomes;
Etc
4/5/17 Developed by Dr IKRAM UL HAQ CPA, PhD
Copyright 24
2012 Derek Hendrikz Consulting
 Risk Triggers:
I SK
R

Level 1 Triggers = We are warned before

the event!!!

Level 2 Triggers = We are warned during

the event!!

Level 3 Triggers = We are warned after S TE

R
SA
the event! DI

4/5/17 Developed by Dr IKRAM UL HAQ CPA, PhD www.derekhendrikz.com

25
Basic Assumptions Regarding the
Probability & Impact of Risk

It definitely will
happen.
It probably wont
happen.
It doesnt matter
anyway.
Disaster if it happens.

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 The Probability / Impact
Risk Matrix
5

Definitely will happen

Event
4

Probabili 3
ty
Probably wont happen
Disaster
2

1
Doesnt matter

1 2 3 4 5

Impact

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Probability / Impact Ratio

Low High
Risk Risk
Probability

No Disastrous
Risk Risk

Impact
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Risk / Disaster
Relationship

Mitigatio
Risk n
Management Plan
Probability

Continge
Disaster ncy
Management Plan

Impact
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Mitigation:

What can we do to mitigate (lessen

the harshness) the risk in terms of
frequency and severity...

Mitigation plans are mostly part of a

risk management initiative.

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Contingency:

What can we do to manage an

unplanned event or occurrence when
it happens or how we can deal with it
once it has happened...

Contingency plans are mostly part of

a disaster management initiative.
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Mitigation / Contingency
Ratio

Probability Controlled
Reduced Risk
Mitigation

Un-controlled Impact
Risk Managed

Contingency
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 The Risk Management
Process:
Step 1: Risk Identification
Analyse the project to identify sources of risk

New Risks
Known Risks

Step 2: Risk Assessment

Assess risk in terms of:
Severity of impact
Likelihood of occurring
Controllability

New Risks Quantified Risk

Step 3: Risk Response Development

Develop a strategy to reduce possible damage
Develop contingency plans

Managed Risk
New Risks
Step 4: Risk Response Control
Implement risk strategy
Monitor and adjust plan for new risks
Change management

Developed by Dr IKRAM UL HAQ CPA,

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PhD
A Model for Risk Management:

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Copyright 34
2012 Derek Hendrikz Consulting
Process to Objectives

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