RISK MANAGEMENT AND PROCEDURES

Risk Management is the process of identifying, assessing, and addressing any financial, legal, strategic, and
security threats to an organization.
It involves a proactive and preventative approach to risk, aiming to identify and then determine the appropriate
response to the business to facilitate better decision-making.

The goal is not to eliminate all risk but to make smart risk decisions, knowing which risks are worth taking and
which ones will get the organization to its goals.
1. Financial risks pertain to potential financial loss due to market fluctuations, economic downturns, or
poor financial management.

Risk Factors:

Market Risk: The stock market fluctuates due to economic conditions.

Credit Risk: If the company struggles financially, it may default on its debts.

Liquidity Risk: The investor may find it difficult to sell the shares at a good price.

Interest Rate Risk: Rising interest rates may push investors toward bonds, reducing stock demand.

Risk Management Strategies:

1. Diversification: Investing in different industries to reduce exposure to one company.

2. Stop-Loss Orders: Setting a limit to automatically sell stocks at a certain price to prevent excessive
losses.
3. Hedging: Using options or derivatives to offset potential losses.
4. Research & Monitoring: Continuously analyzing market trends and company performance.

2. Operational risks arise from internal or external operational failures, such as process errors or system
malfunctions.

Risk Factors:

• System Failure: Hardware or software malfunctions disrupt operations.

• Cybersecurity Threats: If the system is outdated or lacks security patches, it may be vulnerable to
cyberattacks.
• Human Error: Misconfigurations or mistakes by IT staff could trigger system downtime.
• Third-Party Dependency: If the bank relies on external vendors for IT services, delays in their
response can prolong the issue.

Risk Management Strategies:

1. Regular System Maintenance & Updates – Preventing failures with routine checks.
2. Disaster Recovery Plan – Having backup servers and contingency plans in place.
3. Cybersecurity Measures – Implementing firewalls, encryption, and multi-factor authentication.
4. Employee Training – Educating staff on best practices to prevent errors.

3. Reputational risks include anything that damages an organization's public face, such as negative
publicity, customer dissatisfaction, or ethical issues.

Consequences:

• Public Backlash – Customers criticize the brand and call for a boycott.
 • Stock Price Drop – Investors lose confidence, and the company's stock declines.
• Loss of Trust – Loyal customers switch to competitors.
• Regulatory Scrutiny – Authorities investigate if any ethical or legal boundaries were crossed.

Risk Management Strategies:

1. Crisis Communication Plan – Issuing a swift and sincere public apology.

2. Diversity & Sensitivity Training – Ensuring marketing teams understand cultural implications.
3. Social Media Monitoring – Tracking public sentiment to address concerns early.
4. Stakeholder Engagement – Rebuilding trust through transparency and responsible actions.

4. Security risks involve data breaches, cyberattacks, phishing attempts, and unauthorized access to
company systems or information. A major bank experiences a cyberattack where hackers breach its
database and steal customer financial data, including credit card details and personal identification
numbers (PINs).

Consequences:

• Financial Losses – The bank faces lawsuits and compensation claims.

• Regulatory Penalties – Authorities impose fines for failing to protect customer data.
• Reputational Damage – Customers lose trust and switch to competitors.
• Operational Disruptions – The bank must temporarily shut down systems to investigate and fix
vulnerabilities.

Risk Management Strategies:

1. Strong Cybersecurity Measures – Using encryption, firewalls, and multi-factor authentication.

2. Regular Security Audits – Conducting penetration testing to identify weaknesses.
3. Incident Response Plan – Having a clear protocol for detecting and responding to breaches.
4. Employee Training – Educating staff on phishing attacks and cybersecurity best practices.

Effective risk management

• It involves establishing risk management strategies, implementing risk control measures, and regularly
reviewing and updating risk management processes.
• Common strategies to manage risks include avoidance, reduction, sharing, transfer, and acceptance.
• Risk avoidance means not participating in activities that might negatively affect the organization.
• Risk reduction accepts risk but aims to minimize it and its impacts.
• Risk sharing involves transferring some or all of the risk to another party.
• Risk transfer involves contracting a third party to absorb the risk.
• Risk acceptance involves accepting the potential consequences of risk and preparing to manage them if
they occur.
Risk management is an ongoing process that requires constant monitoring and review. It is essential for any
business or organization to thrive and succeed. By managing risks effectively, businesses can safeguard their
reputation, enhance stakeholder confidence, improve decision-making, and increase long-term profitability.

Risk management in healthcare involves the systems and processes used to identify, assess, and mitigate
potential risks to ensure patient safety and compliance with financial and governmental regulations. It
encompasses a wide range of activities from financial risk-transfer measures to investment in clinical quality,
aiming to minimize harm caused by clinical or resourcing errors.
Healthcare risk management is crucial because it directly impacts patient outcomes and staff safety,
requiring speed, accuracy, and efficiency in responding to risks

The role of the healthcare risk manager has evolved alongside this new governance structure to oversee
and facilitate.
 • Risk managers proactively identify risks and estimate potential consequences and upsides.
• They also develop response plans incase risks become reality. On the flip side, to mitigate
organizational exposure,
• They respond and execute containment plans when adverse and unforeseen situations transpire.
Due to the dynamic and multifaceted nature of risk management in healthcare, the role is constantly evolving.
Some of the current responsibilities of the healthcare risk manager include communicating with stakeholders,
documenting and reporting on risk and adverse circumstances, and creating processes, policies, and procedures
for responding to and managing risk and uncertainty. Additionally, risk managers must continually monitor
the ever-shifting landscape of the healthcare risk continuum.

Key Components of Performing Risk Management in Healthcare

To navigate the healthcare risk continuum healthcare organizations and risk managers need to:

• Identify Risk - Since risk management involves managing uncertainty and new risk is constantly
emerging, it is challenging to recognize all the threats a healthcare entity faces.
✓ However, through the use of data, institutional and industry knowledge, and by engaging
everyone, patients, employees, administrators, and payers
• Quantify & Prioritize Risk - Once identified, it is vital to score, rank, and prioritize risks based
on their likelihood and impact of occurrence and then allocate resources and assign tasks based on
these measures.
✓ To accomplish this, risk matrices and heat maps can be deployed that will also help to
visualize risks and promote communication and collaborative decision-making.
• Investigate & Report Sentinel Events - Sentinel Events are “any unanticipated event in a
healthcare setting resulting in death or serious physical or psychological injury to a patient or
patients, not related to the natural course of the patient’s illness.”
✓ When a sentinel event occurs, quick response and thorough investigation address immediate
patient safety issues and reduce future risk. Having an established plan in place promotes
calm and measured response and transparency by staff and ensures that corrective actions
can be implemented and evaluated. Sentinel events are not always the result of errors.
However, achieving transparency and thorough evaluation requires healthcare organizations
to establish an atmosphere of respect, trust, and cooperation between staff and leadership.
• Perform Compliance Reporting - Grievance committee or Managers/Head, and other oversight
bodies mandate reporting of certain types of incidents including sentinel events, medication errors,
and medical device malfunctions.
✓ Incidents such as wrong-site or patient surgery, workplace injuries, medication errors, etc.
need to be documented, coded, and reported.
✓ Needle prick injury, spilled chemical, and burning.
• Capture & Learn from Near Misses & Good Catches - When mistakes or adverse events are
avoided due to luck or intervention, “near misses” and “good catches” occur.
✓ These are often the best way to identify and prevent risk. Healthcare providers should
develop a culture that encourages reporting so that prevention measures and best practices
can be instituted.
• Root cause analysis (RCA’s) for analyzing accidents are used to understand latent failures and
causes as well as relationships among risks.
✓ For example, understaffing and fatigue often lead to medical errors. Applying Root Cause
Analysis, are also involve detailed frameworks to help uncover the causes and effects of
medical mistakes.

Healthcare Risk Management Plan

Healthcare organizations need to have an established and on-going risk management plan in place.
 The Risk Management Plan becomes the guiding document for how an organization strategically
identifies, manages and mitigates risk. Hospital leadership and all department heads should be aware of and
involved in the development and on-going evaluation of the plan.
Healthcare risk management plans communicate the purpose, scope, and objectives of the
organization’s risk management protocol.
They also define the roles and responsibilities of the risk manager and other staff involved in risk
mitigation.

Here is an example of a Healthcare Risk Management Plan.

The format of a Risk Management Plan varies by organization and is contingent on the analysis of
existing systems and historical data as well as the unique characteristics of each healthcare entity. That said,
there are some fundamental components that belong in all healthcare risk management plans:

• Education & Training Risk management plans need to detail employee training requirements
which should include new employee orientation, ongoing and in-service training, annual review
and competency validation, and event-specific training.
• Patient & Family Grievances To promote patient satisfaction and reduce the likelihood of
litigation, procedures for documenting and responding to patient and family complaints shoul d be
described in the Risk Management Plan. Response times, staff responsibilities, and prescribed
actions need to be articulated and communicated.
• Purpose, Goals, & Metrics Risk management plans should clearly define the purpose and benefits
of the healthcare risk management plan. Specific goals to reduce liability claims, sentinel events,
near misses, and the overall cost of the organization’s risk should also be well-articulated.
Additionally, reporting on quantifiable and actionable data should be detailed and mandated by the
plan.

Communication Plan
While it is critical that the healthcare risk management team promote open and spontaneous
dialogue, information about how to communicate about risk and with whom should be provided in the
healthcare risk management plan.
Contingency Plans
Risk management plans also need to include contingency preparation for adverse system-wide
failures and catastrophic situations such as malfunctioning systems, security breaches, and cyber attacks.
The plan needs to include emergency preparedness for things like disease outbreaks, long -term
power loss, and terror attacks or mass shootings.
Reporting Protocols
Every healthcare organization must have a quick and easy-to-use, system for documenting,
classifying, and tracking possible risks and adverse events. These systems must include protocols for
mandatory reporting.
Response & Mitigation
Plans for healthcare risk must also include collaborative systems for responding to reported risk s
and events including acute response, follow-up, reporting, and repeat failure prevention.
The healthcare risk management plan needs to be a living document that is frequently updated and
improved based on emerging risks, lessons learned, new information, and changes in the healthcare system
and practice of medicine. The plan should have provisions for communication and training when these
updates and changes are made.

Reported by:

JERMAINE CASAQUITE
BSM IV