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Risk analysis and minimization
Trevor Slater Mast. Conf. Res.
Sen Assoc ANZIIF
General Manager - FSCL
Trevor the ever helpful employee
All great for a while.....
Then not so good and he has to go
Could a good risk analysis and risk plan have
prevented this happening?
When you are planning or on your holiday do you takes steps to insure its success?
◦ Travel insurance
◦ Itinerary
◦ Sunscreen
◦ Maps
◦ Insect repellent
◦ Pills
Why not do so for your work and other goals?
What is Risk?
In simple terms Risk is anything that may impede you from achieving your goals. It can include:
◦ the potential that actual results will not equal anticipated outcomes (risk as uncertainty)
◦ the threat of bad effects happening (risk as hazard)
Risk is made up of two factors that can be analysed and addressed to prevent or minimise the effects of risk. They are:
◦ the probability of something going wrong
and
◦ the negative consequences that will happen if it does (or impact).
Risk Analysis process
1. Identify the risks
2. What is the probability and impact of each risk - rate on a 1-5 scale
3. Is the current control sufficient?
4. Is the risk acceptable in its current form?
5. Address the risk
6. Take actions to minimise the impact of risks (controls)
Human – loss and incapacity
Operational – access to essential supplies
Reputational – customers and employees
Procedural – internal controls
Project – budget overruns
Financial – business failures
Technical – IT failure
Natural – disasters
Political – changes in laws
Structural – unsafe workplace
Important...
You must identify the risk without taking into account any current
controls.
Human: death or incapacitation of business manager / owner.
Reputational: your clients ‘bad mouthing’ you
Political: a change of Government resulting in changes to the FSP laws
Question 1: name one financial type of risk and one technical type of risk to your
business
Probability or likelihood of risk occurring
1. Remote possibility
2. Unlikely
3. Possible
4. Likely
5. Certain or unavoidable
Impact or outcome if risk occurs
1. Minimal Nil if any effect on reaching the goal
2. Some May delay reaching the goal - a small problem that can
be easily fixed
3. Medium Will possibly prevent reaching the goal – action needed
to rectify
Impact or outcome if risk occurs
4. Serious Will prevent reaching the goal – urgent action needed
5. Catastrophe Will definitely prevent reaching you goal – a major
issue that would stop you reaching the goal –immediate action needed
Impact or outcome if risk occurs
4. Serious Will prevent reaching the goal – urgent action needed
5. Catastrophe Will definitely prevent reaching you goal – a major
issue that would stop you reaching the goal –immediate action needed
High Risk
Probability 5
4
3
2
1
Low Risk 1 2 3 4 5
Impact
Important...
You must assess the risk – impact and probability - without taking
into account any current controls.
Human: death or incapacitation of business manager / owner.
Probability: 2, Impact: 5 = 7
Reputational: your clients ‘bad mouthing’ you
Probability: 3, Impact: 3 = 6
Political: a change of Government resulting in changes to the FSP laws
Probability: 3, Impact: 2 = 5
Question 2:
Rate the probability and impact of:
◦ the financial risk and
◦ the technical risk
....you identified earlier
Is there a current control?
Is it sufficient?
What controls can be put in place?
Is the risk...◦ Untreatable
◦ Avoidable
◦ Too costly to treat
◦ Transferable
Poor Risk has probably been identified but little or no control is in place or the control clearly will not positively impact the risk and/or is not in operation or documented (and staff are unaware of the control)
Fair Control only addresses the risk in part and needs expanding and/or operation and documentation (and staff are aware of the control) could be improved
Good Control addresses risk but documentation (and staff are aware of control) and/or operation could be improved
Excellent Control fully addresses risk, is documented (and staff are aware of control) and in operation
Address each risk – high ratings first
◦ Control – take actions to minimise
◦ Avoid – don’t undertake the activity
◦ Accept – out of your control / cost to control too high
◦ Transfer – have someone else undertake the task
Human: death or incapacitation of business manager / owner.
Probability: 2, Impact: 5 = 7
Reputational: your clients ‘bad mouthing’ you
Probability: 3, Impact: 3 = 6
Political: a change of Government resulting in changes to the FSP laws
Probability: 3, Impact: 2 = 5
Question 3:
Identify and action the controls for:
◦ the financial risk and
◦ the technical risk
....you identified earlier
Identify the risks
What is the probability and impact – rate each
Is the current control sufficient?
Is the risk acceptable in its current form?
Address each risk – ones with a high rating firsto Control
o Avoid
o Remove
o Transfer
Take or assign ownership of the risk
What are some of the risks to business faced by mortgage brokers?
Risk analysis and minimization
Trevor Slater Mast. Conf. Res.
Sen Assoc ANZIIF
General Manager - FSCL