| What is Risk
Management? |
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Risk management is defined as identification, assessment and economic control of those risks that endanger the assets and earning capacity of a business.
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A risk can be tolerated if:
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- The likelihood of its occurrence is sufficiently remote.
- The consequences are not severe.
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Risk can be eliminated or reduced by:
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- Changes in the processes.
- Transferring all or part of the risk.
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Each company’s Risk Management system is different because:
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- Their risks are different.
- Their operations and organisations are unique.
- Their corporate culture is unique.
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Basic activities in any risk management system are:
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- Risk Identification.
- Risk Assessment.
- Risk Control.
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Risk Management is a process through which the companies control their level of risk and the key elements of an effective risk management programme are: policy, procedures and standards.
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- Policy describes the objectives of the Risk Management
programme.
- Procedures determine how the policy will be implemented.
- Standards provide guidance on particular issues.
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Risk Management is particularly necessary to a business which has:
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- A number of different sites.
- A size that precludes any individual knowing the details of every threat.
- A business with overseas operations.
- A range of processes.
- Many subcontractors, or suppliers or other business associates who are not under the direct control of the business.
- A site that it has used for more than thirty years. Old sites sometimes have equipments and work practices dating from times when lower standards were acceptable.
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In short, the larger or more complex the business, the more it will benefit from risk assessment.
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