Risk Management is increasingly recognised as being concerned with both

Risk management is increasingly recognised as being

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Risk Management is increasingly recognised as being concerned with both positive and negative aspects of risk. Therefore this standard considers risk from both perspectives. In the safety field, it is generally recognised that consequences are only negative and therefore the management of safety risk is focused on prevention and mitigation of harm. 2. Risk Management Risk management is a central part of any organisation’s strategic management. It is the process whereby organisations methodically address the risks attaching to their activities with the goal of achieving sustained benefit within each activity and across the portfolio of all activities. The focus of good risk management is the identification and treatment of these risks. Its objective is to add maximum sustainable value to all the activities of the organisation. It marshals the understanding of the potential upside and downside of all those factors which can affect the organisation. It increases the probability of success, and reduces both the probability of failure and the uncertainty of achieving the organisation’s overall objectives. Risk management should be a continuous and developing process which runs throughout the organisation’s strategy and the implementation of that strategy. It should address methodically all the risks surrounding the organisation’s activities past, present and in particular, future. It must be integrated into the culture of the organisation with an effective policy and a programme led by the most senior management. It must translate the strategy into tactical and operational objectives, assigning responsibility throughout the organisation with each manager and employee responsible for the management of risk as part of their job description. It supports accountability, performance measurement and reward, thus promoting operational efficiency at all levels. 2.1 External and Internal Factors The risks facing an organisation and its operations can result from factors both external and internal to the organisation. The diagram overleaf summarises examples of key risks in these areas and shows that some specific risks can have both external and internal drivers and therefore overlap the two areas. They can be categorised further into types of risk such as strategic, financial, operational, hazard, etc. © AIRMIC, ALARM, IRM: 2002, translation copyright FERMA: 2003.
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A RISK MANAGEMENT STANDARD 4 © AIRMIC, ALARM, IRM: 2002, translation copyright FERMA: 2003. 2.1 Examples of the Drivers of Key E X T E R N A L L Y D R I V E N E X T E R N A L L Y D R I V E N FINANCIAL RISKS STRATEGIC RISKS OPERATIONAL RISKS HAZARD RISKS INTEREST RATES FOREIGN EXCHANGE CREDIT COMPETITION CUSTOMER CHANGES INDUSTRY CHANGES CUSTOMER DEMAND M & A INTEGRATION LIQUIDITY & CASH FLOW RESEARCH & DEVELOPMENT INTELLECTUAL CAPITAL INTERNALLY DRIVEN ACCOUNTING CONTROLS INFORMATION SYSTEMS RECRUITMENT SUPPLY CHAIN PUBLIC ACCESS EMPLOYEES PROPERTIES PRODUCTS & SERVICES REGULATIONS CULTURE BOARD COMPOSITION CONTRACTS NATURAL EVENTS SUPPLIERS ENVIRONMENT
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