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Transcript of Risk planning
Léna Thonon March 21, 2013 1.
The risk planning
OUTPUTS 2.Constraints 3.Mechanisms
Enablers 1.1. Introduction 1) Risk register output from preceding processes of the risk management process
2) Existing insurance policies
3) Industry betas compare how the companies in that industry perform relative to the market
4) Business risk appetite 4.2. Risk Appetite Updated risk register after planning
Risk response schedule or document
- risk ID
- risk Description
- impact: time & cost
- risk response category
- action to respond to the risk or opportunity
- owner, manager, actionee,
- date by which the actions will be implemented
- secondary risk that may arise from the risk
= risk preference, attitude, tolerance or capacity
= amount of risk a business is prepared to tolerate at any point in time
A Business's tolerance will be a reflection of its capacity to absorb risk
3 stages process
1) Objectives for shareholders value creation are defined
2) Company establishes a tolerance for earnings variance based on its stated objectives
3) Business units are required to bid for an allocation of the company's overall risk tolerance in pursuit of their business plans
ISO 31000: amount and type of risk an organization is willing to pursue or retain 5.2. Response categories 1/13 2/13 3/13 4/13 5/13 6/13 7/13 8/13 9/13 10/13 11/13 12/13 13/13 Conclusion 1.2. The process 1.3. The goals and subgoals 2.1. Constraints 3.1. Mechanisms/ Enablers 4.1. Inputs 5.1. The outputs Description of the interrelationship with other risks & the strength of the correlation 5.2.1. Eliminate uncertainty 5.2.2. Change the size 5.2.3. Involve others 5.2.4. Take the risk Sources R.J. Chapman (2006) Simple tools and techniques for enterprise risk management
PricewaterhouseCoopers (2008), Does ERM matter? Enterprise risk management for the insurance industry
G. Williams (2007), Management of risk: guidance for practitioners,
D. Hillson (2001), Extending the Risk Process to Manage Opportunities, Identify Assess PLAN Implement Risk removal - Opportunity exploiting Risk reduction - Opportunity enhancing Risk transfer - Opportunity sharing Risk retention - Opportunity acceptance By reducing the likelihood to zero
By reducing the impact to zero How? Risk diversification
Risk spreading How? Reduce the size by reducing the probability and/or the impact When? Beginning of any business activity or a project initiated to accomplish a business improvement 3 tests Opportunity - Business Objective - Cost How? Principal ways:
Financial agreements Does not reduce the risk's severity
Can even increase its impact !!!
+ Rarely totally transferred 4 tests Objectives of the parties -ability to manage - risk context - cost effectiveness How? Actively: allocating appropriate contingency
Passively: doing nothing except monitoring When? More economic to do so
No other alternative (transfer, reduce, remove) 3 tests Options - Timing - Ability to absorb Primary process goal of risk planning Plan specific management responses to threats and opportunities identified IDEFO = Integration Definition for Function Modeling Planning is mandatory to be effective A process= making a contribution to business enterprise goals Perspectives External view: examines the process inputs, outputs, constraints and mechanisms
Internal view: examines the process activities that transform inputs to outputs using the mechanisms The risk planning process = sufficient when satisfied subgoals Activities= tasks necessary to transform a prioritized list of risks into a concrete plan of action for risk resolution RM is an integral part of the project Ensuring plans are prepared, considered, refined and implemented ex: sufficient time was allocated to the planning process, a response was selected for each of the risks and opportunities,... communicate 1) Business risk management
culture 2) Risk management resources 3) Risk management study if: Degree of importance Limited time+accelerated risk management activities = decline of the output Lacks of clarity, inadequate experience, preparation, ... Provides structure to the process activities Ex.: ratios, Risk management process diagnostic, SWOT, PESTEL questions 2 primary process mechanisms 1) Resolution strategy
Pre-defined plan -> reoccuring
2) Risk response flow chart
decisions-making tool -> a response risk category Risk Planning
=logical follow-up of previous chapters
No identification=no response=low competitive advantage
Quick implementation of actions
Speed of change of environment
Impossible to remove an entire risk 4) Risk management plan Roles, responsibilities and objectives not well defined