Risk Management

• Scenario Analysis
• Developing and analyzing different future scenarios to
identify potential risks and their potential impacts.
• How it works: Scenarios can be developed based on various
factors, such as economic conditions, technological
advancements, and geopolitical events.
• Advantages: Helps to identify potential "black swan" events
and their potential impacts. Can improve strategic planning
and decision-making.
• Disadvantages: Can be complex and time-consuming to
develop and analyze. May require specialized expertise.
Risk Treatment Plans and Implementation

Once you've identified and assessed your risks,

the next crucial step is to determine how to
address them. This involves developing and
implementing risk treatment plans.Developing
Risk Treatment PlansPrioritize Risks: Focus on
addressing the most critical risks first, based on
their likelihood and potential impact.Select Risk
Treatment Options: Choose the most appropriate
risk treatment strategy for each identified risk:
 Risk Response Strategies
• Risk Avoidance:
• Definition: Eliminating the risk altogether by
changing the course of action.
• Example: If a company faces significant
political instability in a particular country, they
might avoid expanding operations there.
• Risk Mitigation:
• Definition: Reducing the likelihood or impact of
the risk through preventive measures or controls.
• Examples:
• Implementing safety procedures to reduce workplace
accidents.
• Diversifying investments to reduce portfolio risk.
• Conducting regular system backups to minimize data
loss
• Risk Transfer:
• Definition: Shifting the risk to a third party,
such as through insurance or outsourcing.
• Examples:
• Purchasing insurance to cover potential losses
from natural disasters.
• Outsourcing non-core activities to reduce
operational risks.
Risk sharingThe term 'risk transfer' is often
used in place of risk-sharing in the mistaken
belief that you can transfer a risk to a third
party through insurance or outsourcing. In
practice, if the insurance company or
contractor go bankrupt or end up in court,
the original risk is likely to still revert to the
first party.
• Risk Acceptance:
• Definition: Acknowledging the risk and its
potential consequences, but taking no action
unless the risk occurs.
• Example: Accepting the risk of minor
equipment failures and budgeting for
maintenance and repairs.
• Once the risk is evaluated, it has to be controlled. In
the case of the worker
• working under the machine that will fall any
moment on top of him, risk control implies
• primarily moving the worker from under there and
then fixing the machine so as it does not fall on
anyone. Thus the steps involved are immediate
directions preventing the risk
• and isolating or better removing the hazard to
eliminate the risk
• Corrective Controls: Measures taken to
address the consequences of a risk after it has
occurred. Examples:
• Disaster recovery plans
• Incident response procedures
• Corrective maintenance
Review and Evaluation of Plan
- Risk analysis results and management plans
should be updated periodically in order to:
1. evaluate whether the previously selected
security controls are still applicable and effective
2. evaluate the possible risk level changes in
the business movement.
• Developing and Implementing Risk Response Plans
• Prioritize Risks: Focus on addressing the most critical
risks first, based on their likelihood and potential
impact.
• Develop Action Plans: Create detailed action plans
for each risk response strategy, including:
• Specific actions to be taken
• Responsible parties
• Timelines for implementation
• Resources required
Initial risk management plans will never be
perfect. Practice, experience and
actual loss results, will necessitate changes in the
plan and contribute information to
allow possible different decisions to be made in
dealing with the risk being faced. Risk
analysis results and management plans should be
updated periodically. There are two
primary reasons for this
 Risk Monitoring and Control
This is the ongoing process of tracking identified
risks, monitoring residual risks, and identifying
new risks. It ensures the execution of risk plans
and evaluates their effectiveness in reducing risk
• Continuous Monitoring:
• Regular Reviews: Regularly review the risk
register and update it with new information.
• Tracking Key Risk Indicators (KRIs): Monitor
key indicators that signal potential problems
or changes in risk levels.
• Examples:
• Sales figures, customer satisfaction scores, safety
incident reports, financial performance metrics.
• Evaluating Risk Response Effectiveness:
• Assess the Effectiveness of Controls: Determine if
implemented controls are effectively mitigating or
preventing risks.
• Review Risk Treatment Plans: Evaluate whether
existing risk treatment plans are still appropriate
and effective.
• Analyze Past Incidents: Learn from past incidents to
identify and address root causes and prevent future
occurrences.
• Risk Reporting:
• Regular Communication: Regularly
communicate risk information to relevant
stakeholders (e.g., management, board of
directors, employees).
• Risk Dashboards: Utilize dashboards and
other visualization tools to effectively
communicate risk information
• Importance of Risk Monitoring and Control
• Proactive Risk Management: Enables organizations to
proactively address emerging risks and adjust their risk
management strategies as needed.
• Improved Decision-Making: Provides timely
information to support informed decision-making.
• Enhanced Resilience: Increases an organization's ability
to withstand and recover from unexpected events.
• Continuous Improvement: Facilitates continuous
improvement of the risk management process.
 Operational Risk Management
• Focuses on identifying, assessing, and mitigating
risks that arise from an organization's day-to-day
operations and business workflows.Key
Areas:People Risks: Employee errors, fraud,
misconduct, lack of skills.Process Risks:
Inadequate or flawed business processes, system
failures, data breaches.Systems Risks: Technology
failures, IT security breaches, data loss.External
Events: Natural disasters, pandemics, political
instability.
 PRODUCTION RISK

Agricultural production implies an expected outcome

or yield. Variability in those outcomes poses risks to
your
ability to achieve financial goals. Any production
related
activity or event that has a range of possible
outcomes is
a production risk. The major sources of production
risks are weather, climate changes
 MARKETINGRISK
Marketing is that part of a farm business that transforms production
activities into financial success. Agriculture operates in a global market.
Unanticipated forces anywhere in the world, such as weather or
government action, can lead to dramatic changes in output and input
prices. When these forces are understood, they can become important
considerations for the skilled marketer. Marketing risk is any market
related activity or event that leads to the variability of prices farmers
receive for their products or pay for production inputs. Access to
markets
is also a marketing risk
 FINANCIALRISK
Financial risk encompasses those risks that
threaten the financial health
of the business and has four basic components:
1) The cost and availability of capital;
2) The ability to meet cash flow needs in a timely
manner;
3) The ability to maintain and grow equity;
4) The ability to absorb short-term financial shocks
 HUMANRISK
People are both a source of business risk and an important part
of the
strategy for dealing with risk. At its core, human risk management
is the ability to keep all people who are involved in the business
safe,
satisfied and productive. Human risk can be summarized into four
main categories:
1) Human health and well-being;
2) Family and business relationships;
3) Employee management; and,
4) Transition planning
Role of HRD in Risk Management
• Risk Management is not only about controlling
or reducing the negative effects of physical
and financial threats to the organization.
Rather it also includes handling and
controlling the risk arising from shortage of
employees, their refusal to work and many
other issues.
• It’s human capital who can make or break the
organization. It can take it to new heights or
can weaken it. It is, therefore, very challenging
to handle and manage the risk resulting from
people of the organization.
• It is only human resource that helps
management in dealing with risk. The
situation would be worst if they themselves
become a risk factor.
• People use their skills and intellect to solve
expected or unexpected problems. But what if
when they themselves become the greatest
source of risk or other problems?
• Human Resource Management is not only
about making policies for the organization. In
today’s unpredictable environment, it is
certainly the indispensable part of an
organization.
• The major function of HRD is to get the job
done from employees and that too ensuring
the interest of both the parties - management
and employees.
Functions of HRD
Managing the labor
handling their issues
 proper and regular supply of human
capital
motivating employees to perform
their task in a better way
avoiding unnecessary conflicts
using people to handle risk
HR Related Risks
 problems related to recruitment and retention,
 adjusting skill-confidence level of employees,
 stress management
 maintaining industrial relations
 conflicts and many more.

All these risks can threaten the smooth working of an

organization. HRD and risk management are inter-
related as they both deal with expected and
unexpected problems arising in any organization.
 Strategic Risk Management
Focuses on identifying, assessing, and mitigating
risks that could threaten an organization's ability to
achieve its strategic objectives.Key Areas:Competitive
Risks: New entrants, competitive pressures, changes
in customer preferences.Technological Risks:
Disruptive technologies, obsolescence of existing
products or services.Regulatory Risks: Changes in
laws and regulations that impact the organization's
operations.Reputational Risks: Negative publicity,
scandals, loss of customer trust.
 Project Risk Management
Focuses on identifying, assessing, and mitigating
risks that could jeopardize the success of a specific
project.Key Areas:Scope Creep: Uncontrolled
changes to the project scope.Budget Overruns:
Exceeding the project budget due to unforeseen
costs.Schedule Delays: Delays in project
completion due to unforeseen events or
challenges.Resource Constraints: Lack of access to
necessary resources (e.g., personnel, equipment).
 Cybersecurity Risk Management
Focuses on identifying, assessing, and mitigating
risks related to information security and
cyberattacks.Key Areas:Data Breaches:
Unauthorized access to sensitive
data.Cyberattacks: Malware attacks, phishing
attacks, denial-of-service attacks.Data Loss:
Accidental or intentional loss of data.System
Disruptions: Disruptions to IT systems and
services.
 The Benefits of Risk Management
1. Forecasts Probable Issues
- It changes the culture of a business organization

reactive to proactive
- Risk management forces the companies to take a
hard look at each of their business processes and
decide what can possibly go wrong.
- “What-if analysis” helps companies become
more proactive and forecast probable issues.
2. Avoiding Catastrophic Events
• Risk management prepares the companies for all
kinds of shocks.
• Risk managers try to foresee the small shocks which
affect the day-to-day business of any firm. However,
they also try to focus on catastrophic events.
• Such events have a very low probability of
occurring. However, if they do occur, then
companies need to be prepared to deal with them
without going bankrupt.
• Such events have gained prominence in recent
years. These events are called “black swan” events.
- A “black swan event”, a phrase commonly used in
the world of finance is an extremely negative event or
occurrence that is impossibly difficult to predict. -
Black swan events are events that are unexpected and
unknowable.
- The term was popularized by former Wall Street
trader Nassim Nicholas Taleb, who wrote about the
concept in his 2001 book Fooled by Randomness.
However, the origins of the term
“Black Swan” come from a Latin
expression used to describe something
as being a rare event, nearly
impossible
In more recent times, the metaphor
has been used to describe something
that challenges the foundation of any
system of thought. In other words, the
entire premise that swans could only
be white was undone as soon as a
single black swan was observed.
 What is the Purpose of using Risk
Management Tools and Techniques?
• The purpose of risk management tools and
techniques are to give organizations a good
way to create the best possible risk
management strategy. Tools and techniques
draw upon best practice to help to create
guidelines and tricks which can help to make
the risk management process much easier to
complete.
 The Role Of Insurance In Risk
Management.
• The role of insurance in risk management is in exchange for
the payment of a known loss (the premium), insurance
transfers the financial consequences of covered loss
exposures from the insured to the insurance company.
• In the last half of the 20th century, risk management
developed from a group of vague, unorganized concepts,
relying heavily on common sense, to a highly developed and
organized discipline that enables organizations to anticipate
losses and suggest actions to take to prevent/reduce those
losses.
• Risk management is the method and discipline used to address
this uncertainty.
 Insurance in Risk Management
• Insurance is a contract, represented by a
policy, in which a policyholder receives
financial protection or reimbursement
against losses from an insurance
company. The company pools clients’
risks to make payments more affordable
for the insured.
 Communicating Risk
Effective risk communication is crucial for
building trust, fostering collaboration, and
ensuring that everyone understands and
supports risk management efforts. Here's how
to effectively communicate risk information to
stakeholders
Identify Key Stakeholders: Determine who needs to
receive risk information, including:Internal
Stakeholders: Management, employees,
departments.External Stakeholders: Investors,
customers, suppliers, regulators.Tailor Your
Message: Tailor your communication to the specific
needs, interests, and concerns of each stakeholder
group. Use language that is appropriate for their
level of understanding and avoid technical jargon.
• Choose the Right Channels
• Select Appropriate Channels: Choose communication channels
that are appropriate for the audience and the message.
Options include:
• Meetings: For in-depth discussions and Q&A sessions.
• Reports: For formal communication of risk information.
• Dashboards: For visualizing key risk indicators (KRIs) and other risk
data.
• Presentations: For conveying complex information in a concise and
engaging manner.
• Email: For routine updates and alerts.
• Intranet/Extranet: For sharing information with internal and external
stakeholders
• Build Trust and Transparency
• Be Honest and Transparent: Be open and honest
about the risks facing the organization.
• Be Responsive to Questions: Answer questions and
address concerns promptly and effectively.
• Demonstrate Accountability: Demonstrate that you
are taking responsibility for managing risks.
• Foster a Culture of Open Communication: Encourage
open communication and feedback from
stakeholders.
• Regularly Review and Update Communication
• Monitor Stakeholder Feedback: Regularly monitor
stakeholder feedback and adjust your communication
strategies accordingly.
• Review and Update Communication Materials:
Regularly review and update communication materials
to ensure they remain accurate and relevant.
• Conduct Communication Audits: Periodically conduct
communication audits to assess the effectiveness of
your risk communication efforts
Why Risk Management May Fail?
Limitations of scope
Lack of top management support
Did not engage all stakeholders
Failure to share information
RM not embedded within planning
& management system
Tips for Success
Involve all levels of staff & management
in the process
Check controls are relevant & effective
Ensure risk owner takes responsibility for
management of risks under their control
Focus on risk cause, not its symptoms
 Integrating Risk management Into
Organization
Integrating risk management into organizational
decision-making processes is crucial for making
informed and strategic choices. Here's how to
effectively do so
• Embed Risk Assessment in Decision-Making Frameworks
• Develop a Risk Assessment Checklist: Create a checklist of
key risk considerations to be evaluated for each decision.
This could include:
• Potential impacts: Financial, operational, reputational, legal,
and environmental.
• Likelihood of occurrence: High, medium, or low probability.
• Mitigation options: Available strategies to address potential
risks.
• Resource implications: The potential costs and resource
requirements for risk mitigation
Incorporate Risk Assessment into Decision-Making
Meetings: Make risk assessment a regular part of
all key decision-making meetings, such as executive
committee meetings, project steering committees,
and investment review boards.Develop "Risk
Registers" for Decisions: Create and maintain risk
registers for major decisions, documenting
identified risks, their potential impacts, and the
chosen risk mitigation strategies
Regularly Review and Update Risk Management
ProcessesConduct Periodic Reviews: Regularly
review and update decision-making processes to
ensure that risk considerations are fully
integrated. Learn from Experience: Analyze
past decisions and their outcomes to identify
areas for improvement in the risk management
process
• Adapt to Changing Circumstances: Continuously
adapt risk management processes to address
new and emerging risks. By integrating risk
management into organizational decision-
making processes, organizations can:Make more
informed decisions: By considering potential
risks and their potential impacts.Improve
strategic planning: By identifying and addressing
potential threats to strategic objectives.
Enhance operational efficiency: By minimizing
disruptions and improving the overall
effectiveness of operations. Increase resilience:
By better preparing for and responding to
unexpected events.Enhance stakeholder
confidence: By demonstrating a commitment to
responsible risk management
Foster a Culture of Risk AwarenessPromote
Open Communication: Encourage open and
honest discussions about risks at all levels of the
organization.Empower Employees: Empower
employees to identify and report potential
risks.Recognize and Reward Risk Awareness:
Acknowledge and reward individuals and teams
who effectively identify and manage risks.