BSBRSK501 Manage Risk: A Comprehensive Risk Management Report

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BSBRSK501 MANAGE RISK
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Table of Contents
Introduction...........................................................................................................................................3
Assessment Task 1................................................................................................................................4
Assessment Task 2: Case study and Practical Demonstration.............................................................14
Part 1...............................................................................................................................................14
Stage Two – Analysing the risks.....................................................................................................16
Stage Three – Identifying measures to treat the risks.......................................................................17
Stage Four – Implementing and monitoring the risk treatment plan................................................18
Conclusion...........................................................................................................................................19
References...........................................................................................................................................20
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Introduction
This report has been prepared for providing a detailed analysis of risk management and
different techniques that can be used for assessing and mitigating the risks. The first section
of the report contains the basic details related to risk associated with implementing projects in
organisations along with factors that have to be considered while assessing the risks. The
second part of the report contains the risk matrix template and PEST and SWOT analysis has
been conducted for analysing the threats.
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Assessment Task 1
1. List two examples of each of the following types of risk:
a) Operational Risks
Risks arising out o of natural calamities
Losing valuable data by fraudulent activities
b) Strategic risks
Liability risks
Risks arising out of new projects and ventures
c) External risks
Changes in economic condition
Changes in technology
2. Describe the six key steps of the risk management process
Following are the key steps that are essential in the risk management process:
Step 1: Identifying the hazard
This step involves examining the process or work area and identifying threats that may result
in causing health and safety issues.
Step 2: Identifying the risk
This is the second step in the process that involves identifying the possible consequences of
the hazards. This enables to determine the possible damages to the property or illness to
workers and develop risk mitigation plans accordingly (Giannakis & Papadopoulos, 2016).
Step 3: Assessing the risk
In this step, the severity or impact of injury/illness resulting from hazard is identified and the
possible loss that can be incurred because of injury/illness.
Step 4: Controlling the risk
Controlling the risk involves searching for suitable options for mitigating the risks and the
steps that are followed are:
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 Eliminating hazard
 Substituting the hazard
 Implementing control measures
 Administrative controls
 Providing appropriate protective equipment
Step 5: Document
The information that is collected by following the above steps has to be documented that
includes:
 Hazards that have been identified
 Risk assessment procedure followed
 Control measures that have been implemented for each hazard
 Methods followed for reviewing the control measures
 Administrative control measures adopted at each stage
Step 6: Monitoring and Review
It is essential that authorities continue the process of identifying the hazards so that new
techniques can be explored for effective mitigation of the hazards.
3 What are the two components of risk management that must occur continually
throughout the process? (2-5 words)
a) Probability of hazard
b) Possible consequences
4 List three sources of information that you might use in order to understand your
organisation’s objectives.
a) Annual reports and audit reports
b) Government agencies
c) Media sources
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5 Explain and describe two items that might be considered for each of the components
of a PESTL analysis.
PESTEL analysis is conducted for determining the external forces that can influence the
decision-making process of an organisation which is discussed below:
Political:
a) Political stability in the region results in building a positive image of the organisation as
policies remain unchanged over a period of time.
b) The government is committed to formulating policies for the protection of its citizen and
all forms of exploitation have been prohibited under the law.
Economic:
a) Australian dollar has a favourable demand in the international market and it encourages
firms to commence business in the region (Carnegie, et. al., 2018).
b) Fluctuations in the interest rates impact the profitability of the organisation.
Social:
a) Australia is a multi-cultural society and has a peaceful environment.
b) Citizens are aware of the policies formulated by the government.
Technological:
a) The government takes various initiatives for promoting innovation in the region.
b) Citizens support new technology and do not resist changes in technological domain.
Legal:
a) The government has formulated legislation such as Privacy Act and Anti-discrimination
act for safeguarding the interests of the citizens.
b) The government also supports various types of industries and supports small and medium
enterprises by providing rebates on taxes.
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Environmental:
a) The government is committed to reducing the carbon emission and encourages
organisations to use an alternative source of energy such as solar and wind while performing
various operations.
b) Wildlife Protection Act, 2001 has been enforced for protecting the natural biodiversity of
natural parks and sanctuaries.
6 Explain what a stakeholder is and what methods you might use to identify internal
and external stakeholders?
Stakeholders can be defined as organisations, individuals, or a group that have interests in the
performance of the firm and take part in the decision-making process of the firm. The
important stakeholders of an organisation include creditors, suppliers, shareholders,
government agencies, and employees. The stakeholders provide suggestions to the top
management while formulating policies and they take a keen interest in determining the
profitability of the enterprise (Khalfan, et. al., 2015).
Stakeholders can be broadly divided into two categories; external and internal stakeholders.
External stakeholders are the interest groups that are not part of the organisation but they are
interested in the financial performance of a business. These interest groups consist of
suppliers, creditors, and customers. They influence the decision-making process and in few
cases the management will have only a limited level of control over them. On the other hand,
internal stakeholders can be easily managed and controlled as they form part of the
organisation. These include employees, board of directors, and volunteers.
In order to identify and classify the stakeholders into internal and external, the assessment has
to be performed for understanding their importance and influence. Influence is the ability of
the stakeholders to influence the decision-making process. Importance refers to the priority of
the organisation for resolving the issues and protecting the interests of the stakeholders.
Stakeholder matrix is constructed for determining the importance of each stakeholder:
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Figure 1: Stakeholder Matrix
Source: (Khalfan, et. al., 2015)
7 Describe the meaning of ‘risk criteria’ and its purpose?
Risk criteria are the standards and measures used for assessing the importance of the risk that
is identified for making appropriate judgements. The factors such as legal requirements,
costs, and liability associated with risks are determined while deciding the risk criteria. The
purpose of risk criteria is to determine suitable criteria for minimising the risks and for
safeguarding the interests of the stakeholders.
8 List three reasons why continual communication is critical to good risk management
Continual communication is essential for providing continuous information and determining
the actual procedure followed for mitigating the risks. Following are the reasons for ensuring
continual communication in a risk management:
 Effective risk communication enables to minimise uncertainties arising out of
potential hazards and helps the stakeholders to realise the possible damages that can
occur due to the occurrence of an event. Both the internal and external stakeholders
will be aware of the consequences of hazards and they will help the organisation to
recover quickly (Cagliano, et. al., 2015).
 Risk communication enhances the credibility of the organisation and stakeholders will
give a positive opinion thus they will continue to invest in new project and ventures
planned by the organisation. It is important to gain the confidence of stakeholders to
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ensure continuous growth and development of the firm and without the support of
stakeholders, organisations will not be able to achieve desired objectives.
 Risk communication helps to develop common procedures that can be followed
during uncertain events and helps the organisation to develop effective risk mitigation
strategies.
9 Identify and explain five tools that you might use in order to identify risks.
Documentation reviews: The project related documents are reviewed such as previous
reports, procedures followed, and types of resources used while mitigating hazards. These
documents provide valuable insights related to the level of success achieved and the actual
time that is taken to mitigating the risks.
Delphi technique: In this method, a group of experts and identified and requests are sent
regarding the steps that have been considered for mitigating hazards. The responses are
recorded and documented and further reviews are conducted while arriving at final
conclusions (Farrell & Gallagher, 2015).
Root Cause Analysis: The actual reasons for the hazards are identified along with
determining associated risks.
Probability and Impact matrix: This matrix is prepared for ascertaining the risks that
require immediate responses.
Risk Data Quality Assessment: Different types of data are collected related to identified
risks and factors such as type and quantity of data available and reliability of the data is
assessed while drafting risk mitigation plans.
10 What are the main components of a risk analysis?
The main components are; risk assessment, risk management, and risk communication.
11 What is the difference between qualitative and quantitative risk analysis?
Qualitative Risk Analysis Quantitative Risk Analysis
Considers all the risks that are identified in Considers only those risks that require further
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the risk identification process analysis as they impact the performance of
the business
Stakeholders views are considered for
judging probability of impact
Mathematical and simulation models are used
for determining the actual impact of the
identified risks
The individual risks are assessed by
assigning numerical values to the identified
risks and ranks are provided depending on
the degree of their impact. For instance,
numerical value ranging from 1 to 5 is
assigned wherein 1 indicates high impact.
The impact of an event is calculated in terms
of time and money and contingency funds
required for achieving desired level of
positive outcomes.
12 Why would you use a likelihood and consequence table?
This table is used in qualitative risk analysis process for calculating the magnitude of impact
and level of probability of occurrence of an event. It guides the policymakers while making
important decisions and to identify those threats that require immediate attention.
13 Explain five options for risk treatment
a) Avoidance: Organisations may avoid taking risks thereby ensuring safety and
security of the resources.
b) Reduction: Devising mitigation strategies for minimising the effects of identified
risks (Yeboah, et. al., 2016).
c) Transfer: Appointing third-party vendors such as insurance companies and
transferring full or part of the risk.
d) Acceptance: Organisations choose to face the risks associated with an event.
e) Sharing: Distributing the risks to individuals or selected organisations.
14 What is a cost–benefit analysis?
It is a systematic approach for determining the viability of investing in a project by evaluating
the profits that can be generated over a period of time.
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15 What factors should be considered when conducting a cost–benefit analysis?
The factors that have to be considered while performing cost-benefit analysis are:
 Time period required for realising profits
 Assumptions considered for calculating the returns.
16 Identify and explain five items that should be documented in a risk management
plan
Risks identified: This is essential as it enables to determine the different types of risks
associated with the tasks. It also helps organisations to evaluate the possibilities of using the
best alternatives for achieving better outcomes. Also, new techniques and methods can be
used while formulating risk management strategies thereby minimising the damages caused
because of the occurrence of an event (Forouzanfar, et. al., 2016).
Type of risk mitigation strategy used: The methods used for mitigating the identified risks;
avoid, transfer, reduce, transfer, or share, have to be documented as it enables to determine
the outcomes achieved for each type of risk identified. The documents should mention the
reason for selecting the method so that better alternatives can be selected in the future.
Risk evaluation tools: Different tools and techniques used for assessing the risks have to be
documented as it helps the stakeholders to understand the effectiveness achieved by using
these tools.
Alternative plans: This is another important detail that has to be considered while
documenting the project plan as it helps the management to assess the impact of
implementing alternative plans.
Communication: The documentation should also contain the type of communication matrix
used for providing details related to the steps that are taken to minimise the effects of an
event.
17 Why is it important to ensure continual reviewing of the risk management plan?
The management should consider reviewing the risk management plan in order to improve
organisation’s risk management framework. Also, due to the dynamic business environment,
the risks associated with the business changes and continuous review enables to determine
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new threats that have to be mitigated. Additionally, the changes required in the mitigation
plan can be implemented quickly ensuring avoidance of an event.
18 Describe three mechanisms that can be used to ensure continual monitoring and
updating of the risk management plan
Monitoring and reviewing help to determine the effects of implementing the risk management
plan and helps to find alternatives for increasing the effectiveness of risk mitigation
framework. Following are the mechanisms that can be used by organisations:
Input: The information related to the risk management process has to be received in the form
of risk registers, performance data, and the impact of risks. This information provides an
insight as to the risks that may have to be overcome in the future.
Tools and Techniques: Tools and techniques such as audits, technical performance
measurement, and variance and trend analysis enable to determine the consequences related
to the occurrence of an event.
Output data: The output of implementing the plan has to be considered by evaluating
organisational needs and feedback received from stakeholders. This enables to change the
existing techniques and mitigate the risks effectively.
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Legislation Description and Examples
(a) Duty of Care Duty of care is a legal concept of negligence and it is
imposed on organisations requiring adherence to standard
of reasonable care and breach of it attracts penalties. For
example, injuries at workplace while using equipment
(b) Company Law This act administers the activities performed by firms and
regulates it’s working. For instance, each and every
company has to be registered under this act
(c) Contract Law This act considers legal enforcement of promises as part of
agreement signed between the parties. For example,
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