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General thoughts about risks and risk management.
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Whitepaper on Risk and Whitepaper on Risk and Risk ManagementRisk Management
December 2009Markus Aeschimannwww.mindarea.ch / [email protected]
Definition of RiskDefinition of Risk
Uncertainty that influences the achievement of objectives in a negative or positive way.
Elements included in this definition:-Looking into the future-Influencing factors that are not known or difficult to identify and assess-Consequences in relation of achievement of an objective
December 2009 Markus Aeschimann 2
Linkage between Opportunities, Linkage between Opportunities, Objectives and RisksObjectives and Risks
December 2009 Markus Aeschimann 3
Environment(Economy, Society,
Technology, Ecology)
Opportunities Threats
Business Opportunities
Risks
Strengths
Weaknesses
Risks, that objectives can not
be reached
Objective(to exploit business
opportunity)
Objective(to reduce risks)
The external environment is the source for opportunities or threats. Combined with internal strengths or weaknesses and the decision to respond to them, this creates uncertainty, i.e. business opportunities or risks.
When taking decisions, objectives are set, either to exploit a specific business opportunity, or to mitigate a specific risk.
However, a risk is always to be assessed in relation to a specific objective.
The more Philosophical Approach The more Philosophical Approach to Risks based on Decisionsto Risks based on Decisions
December 2009 Markus Aeschimann 4
Environment
Opportunities
Threats
Business Opportunity
Risk
Strengths
Weaknesses
Decision
Objective to exploitBusiness Opportunity
ActionActionAction
To turn a generic Opportunity into a specific Business Opportunity, a Decision has to be taken (considering internal and external factors)
Risk(s) of not achieving the ObjectiveBased on the
Decision taken, external Threats and internal Weaknesses turn into Risks
Objective
Actions to achieve Objective
Risk Management Explained on Risk Management Explained on the Example of a Studentthe Example of a Student
December 2009 Markus Aeschimann 5
Firstly, a goal has to be set, here it’s passing the Masters exam.
Then, possible risks are identified and analyzed to create transparency.
Evaluating the risks according to impact and likelihood allows a prioritization and selection of the appropriate risk management strategy.
At the end, manage the risks by planning and implementing adequate actions.
