An Overview Of Risk Management Principles And Practice

Terms

Definition

Explanation

AS/NZS ISO 31000:2009

Example:

This is the standard of the risk management frameworks and programs and this provided the guidelines at the time of risk management development. This is defined as the guide of implementing the risk management process.

AS/NZS ISO 31000:2009 can help to achieve the confidence and trust of the stakeholders, organizational resilience, reliable decision making, planning and the proactive management. All these guidelines are general principles of the risk management.

This standard is mainly used by the fund member agencies. Except them these can be used by the many other private or community enterprise, association, group or individual. Therefore, ISO 31000:2009 is not specific to any industry or sector. 

Duty of care

Example:

This term is defined as the legal obligation which ensures the safety and well-being of the employees.  This is imposed by the individual or any other organization. The organizational policies and procedures of the companies include the duty of care as a responsibility of the organization.

The main motive of this obligation is that organization avoids those actions that harm the other people working in the organizations. The safety and the care for the employees are important to increase their performance and productivity.

It can be applied by the directors, accountants, auditors, manufacturer to make sure about the standard of care fulfill their duties.

WHS policy

Example:

Work health policies are the commitments that the management or the organization does in the favor of the health and safety of the employees working in the organization. The WHS policies are regulated by the organization and the state government to control the risks in future.

WHS policies in the organizations are used to remove or minimize the risks associated with the health, safety and welfare of the workers. The WHS policies in the organization retain the employees for the long period of time because employees will feel secure and safe in the organization.

This policy is applied in the big organization and covering the health of the employees working in the organization such as contractors, agents, consultants and staff.

Risk management plan

Example:

Risk management plan is the document prepared by the managers that includes the risks, their impact and the definition of the responses to issues. This is the clear fact that risks cannot be eradicated completely, as they can be mitigated, reduced or accepted by the organizations.

It consists of the risk assessment matrix and it includes the four different ways to handle the risks. These four ways are, avoid, mitigate, transfer and accept.

Risk management plans are used to save the companies from the future losses.

When you are planning any project, it involves the uncertain events which need to be managed by the project manager.

Likelihood

The likelihood is defined as the probability of an event happening. This is the informal way of discussing about the situation that may take place and may be influenced by the factors not observed yet.

Likelihood is the frequency levels in the process of the risk assessment processes.  These are also helpful in managing the risks as these likelihood tells the frequency of the risk level that affect the objectives of the company.

A person applying for a job, but having a criminal record will minimize the likelihood of getting the call from the job or any job offer letter. Likelihood in this example is like the chance of the achieving goals.

Consequence

Example:

The consequence is defined as the effect, result, or the outcome of the event that is occurring earlier. The consequence in the terms of the risk management can be positive or negative.

However, the Consequences of the risk identified are helpful in the evaluation as well as the risk implementation processes. The organization can analyze the criticality of the projects or the events through the consequence.

The organizations act on the consequences of the risks rather than the type of risks or nature of the risks.

The performance of the employees is low because of the negative environment of the company. However the negative environment is the risk and low performance is the consequence

Hierarchy of controls

Example:

A Hierarchy of control is the way of determining effective and feasible solutions for controlling the occupational hazards in order to protect the workers from the risks.

This hierarchy of controls involves the various steps such as the PPE (personal protective equipments), administrative controls, engineering controls, substitution of the hazards and elimination of the hazards. These hierarchies of controls are used by the organization to create healthier, better and safer workplace.

The change in the process of production to avoid the wastage and the chemical omission that has a bad effect on the health of the employees working in the workplaces.

Manage risk

The process of the management of the risks involves the identification, assessment, risk prioritization of the risks. These are defined as the effect of the uncertainty on the objectives as per the ISO 31000, which is followed in order to avoid, monitor and reduce the impact of the uncertain events and to maximize the productivity in the organizations.

In the terms of the finance, the management of risks involves the identification of the potential risks, risk analysis and the taking the preventive steps in order to reduce their negative effects.

When an organization is planning to invest their money, then, number of financial risks associated with this decision. This can be managed by the implementation of the risks management plans.

Stakeholders

Example:

Stakeholders are the persons or individuals who can or affected by the policies, actions of the organization and objectives.  A stakeholder in the organization can be internal and external to the business. These stakeholders are in the vice versa situation where they can affect the business and also can affected by the business.

Stakeholders have the high interest and great impact on the business. It is difficult to control the external stakeholders such as, government, competitors, unions and other legislations.

Example: Stakeholders in the business are the creditors, directors, employees, government, unions, suppliers and the other local communities.

Analyze risk

Example

Risk analysis helps to understand the risks. Risk analysis the sources of risks,

nature of risks, results and impact of them to organizational performance, whether it is positive or negative. This information helps to plan the better risk management plan for the future. In risk identifications that affect the consequences should be identified.

Risk analysis find out the reason and understand that factors that how frequently the risk happened and their impacts. Risk analysis calculates the risk from its factors and report to the organizations. Risk analysis is the important part of the risk management process which helps the organization in taking decisions.

Monitoring risk

Example:

It is the process of tracking the risks and then reviewing them in the terms of their impact and the consequences and execute the risk response plans to evaluate the effectiveness through the risk management process.

However, the risk monitoring and control has the aim to evaluate whether the assumptions of the project are valid or not, the state of the risk, identification of the contingency reserves.

The risk of the increase in the price of the US dollar and it needs to be monitored by continuously checking the currency rates and evaluate the possible outcomes with the new risks.

Communications matrix

Example:

This matrix is the assessment tool which is used by the organization to manage the information and communicating with the relevant people in order to create some changes in the communication part of the organizations. Risk communication in the organization is the significant part of the risk assessment process. The communication of the risk management plans with the stakeholders is important to have the common understanding of the assumptions and processes that are used in the process of the risk assessment. Moreover, these matrixes are utilized to see the progression in the communication skills of the employees.

Communication is the process of the sharing and transferring the ideas, plans and the required information from one person to another. Therefore, the communication matrix is the document consists of the communication management plans for the specific project.

Communicating about the risk management plans with the stakeholders by sharing this matrix.

External auditors

Example:

External audits mean the analysis of the external factors that have a great impact on the working of the organization. The external audits consider the factors that cannot be controlled by the organizations and the external auditors are also from outside the firm.

The external audit is the assessment of the risks that are identified externally such as the customers, government, legislation and the local communities. This is a regulated activity and helpful in taking the decisions in the organizations

Example of the external audit is the analysis of the annual reports that are being misstated materially. These audits help in risk controlling and monitoring.

Internal audits

Example:

Internal audits are the opposite of the external as these are the assessment of the risks within the organizations and the internal auditors are employed by the business.

These types of the audits are set internally in order to analyze the risks related to the business objectives and the strategies. Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations.

To analyze the occupational health standards in order to create value for the stakeholders and to retain the employees.

Legislation

Example:

Legislation is the laws that build by the government of the country. Every law has the motive and it is enacted by the government to control the future risks

The legal definition of the legislation is the process of the enactment of the bills into the law. The legislation of the countries is different in nature. Every country has their own laws and regulations.

The government sets a rule for the import and export of the business. The trade policies and the government legislation applied by the country to control the future risks and to avoid the negative impact of the risk.

WHS Act 2011

Example:

This act provides the legislation for the work health and safety of the employees and also this act is the amendment of workers’ rehabilitation and compensation act 2003 for the specific purposes.

The main objective of this act is to provide the balanced framework to all the workers in the context of the safety and health of the workers. Moreover, providing fir and effective working environment is the another motive of this act.

Provide full protection to the workers from the accidental injury at the time of work

WHS Regulations

Example:

Work health and safety regulations are some of the standards set to meet the risks and analyze the workplaces. This analysis is done to provide the advices, handing over the notices and penalties wherever necessary. The WHS policies are regulated by the organization and the state government to control the risks in future.

WHS regulations are the standards used to promote the fair practices. The safety laws and the work health regulations are imposed by the regulating agencies.

These regulations are helpful in giving the overview to make the workplaces healthier and safer.

OHS

Example:

OHS stands for the occupational health and safety. According to this law, the organization must ensure the safety, compensation and rehabilitation system. These regulations are advantageous in case the worker injured at the work.

This OHS policy is concerned with the occupational health of the people working in the organization and protects them from the possible future harm. However, it is important to analyze the occupational health standards in order to create value for the stakeholders and to retain the employees

Offering accidental insurance to all the workers who perform the risky tasks.

Harmonization

Example:

Harmonization is the process of giving the equal treatment to all the employees working in the same company. It involves the rules regarding the pay, timings, working hours and the rights.

In the context of the global or international, the harmonization is the process of making similar laws in the different countries and companies in order to make the work easy for the employees.

The export companies want the harmonization in the terms of the laws and regulations between the America and European union.

Work Cover

Example:

Work covers are the injury claims.  There are many organizations offering the advisory services in order to improve the work health and safety. The license and the registrations of the dangerous work is the one of the key regulations.

The work cover is the support to the employees from the different companies and countries side as to get the maximum productivity from the employees. The insurance covers are of many types which are given to the workers on the basis of their work and the level of risk they are facing.

For example: The accidental insurance, fire insurance and medical insurance are some of the work covers examples.