Topic 7 The Australian Standard - Risk Management Overview Learning Activity 1 The main elements of risk management are as follows: Establish the context – establish the strategic, organisational and risk management context in which the rest of the process will take place. Identify what, why and how things can arise as the basis for further analysis. Analyse risks – determine the existing controls and analyse risks in terms of consequence and likelihood in the context of those controls. The analysis should consider the range of potential consequences and how likely those consequences are to occur. Evaluate risks – compare estimated levels of risk against the pre-established criteria. This enables risks to be ranked so as to identify management priorities. Treat risks– accept and monitor low-priority risks. For other risks, develop and implement a specific management plan, which includes consideration of funding. Monitor review– monitor and review the performance of the risk management system and changes, which might affect it. Communicate and consult– communicate and consult with internal and external stakeholders as appropriate at each stage of the risk management process. Learning Activity 2 Discuss and comment on the following statement; “Management of risk is an integral part of the management process. Risk management is a multifaceted process appropriate aspects of which are often best carried out by a multi-disciplinary team. It is an iterative process of continual improvement. To make money a business is required to take risks. A business may also face risks that it did not actively intend to take when making business decisions or operating in its business environment. Therefore in order to maximise gains and potential opportunities, the management of risk is an integral part of managing the business. The organisation needs to assess all risks involved in running the business, both internal and external, and not simply the risks surrounding significant decisions. Risks are not static and change as the business changes with new risks emerging as circumstances change. Risks should be actively managed and should therefore form part of the management process. There are risks associated with the strategic plans of the organisation that need to be managed as well as the day-to-day operational type of risks. The people that are involved with the day-to-day operations are in a better position to identify risks and make an assessment on their potential likelihood and impact. The nature of certain risks may mean that they can be managed on a decentralised basis, whereas the nature of other risks means that centralisation is a better way of managing the risks. Some risks may also be
of a technical nature that needs someone with the requisite skills before they can be properly managed. It is unlikely therefore that one person will have all the qualifications, experience and skills necessary to carry out the appropriate risk management practices in all situations.
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