Operational risk management

Task 1:

Risk as a concept doesn’t need to be defined as a term that everyone deliberates in context of their everyday life, especially in succession of various crises at all levels and on wide geographical scale. What’s important to us here is to know the extent to which this concept is linked to a framework of corporate activity environment whether at a level of infrastructure or external factors and challenges that face which affect various activities negatively or positively (Rajić, 2015). In summary, all that we mean by risk of corporate activity is the possibility of unpredictable and unplanned losses and/or fluctuations in the expected return on any form of company’s services or products. This concept in itself points to the view that adverse effects arising from potential future events have potential to influence achievement of desired corporate objectives and a successful implementation of its strategy

On this basis, it’s necessary not only to identify concept of risk, but to identify its types and to take advantage of other experiences in this area for avoiding potential challenges to obtain best results (Griffin, 2018). Among these risks of corporate activity are the following;

• Regular risks; which refer to the risks that cannot be avoided or reduced by diversification which known as the market risks resulting from factors which affect the market in general and lead to uncertainty about return on investment, as; recession, inflation, higher interest rates, economic crises, etc…
• Irregular risks; which refers to the risks that can be avoided or reduced by diversification which known as the risks that affect the amount of expected returns and don’t affect market system as it’s independent of the factors affecting the economic activity as a whole, such as; administrative errors, emergence of new inventions competing the company, changing consumer tastes, new laws affecting the company, etc…

Consequences of both types of risks include some of the following events;

• Change in the level of market interest rates in general.
• Changes in expected revenues due to high inflation rates.
• Change in safety of the financial position of the company.
• Impact on expected cash flows and rate of return on investment.
• Making wrong decisions in the field of production, marketing or investment, which may adversely affect the market value.

Therefore, operational manager of risk management has some responsibilities (Randstad UK Holding Limited, 2015) including some of the following;

• Developing needed policies to implement risk management principles and adhere to internal controls and processes to identify and address risks facing the company.
• Ensuring that all employees in the company are fully aware of risks within their work environment and their personal duties toward the same.
• Developing and issuing policies, procedures, principles and administrative guidelines to ensure division of all necessary risks carried out within the company with specific consultants.
• Implementing and monitoring any specific risks through regulatory measures.
• Ensuring that all staff in the company are given the necessary information, training and experience to enable them to participate effectively in risk management practices.
• Providing regular reports with relevant information, including recommendations to the executive chairman and board of directors that support effective risk management.

Task 2 :

The risk assessment in the workplace is a necessity, which can be defined simply by trying to know all the potential hazards in the work environment and thus how to contain it where this process is done within the work environment using risk management model which is a model that helps to examine what can cause harm to employees or workers in their workplace so that they can know whether the precautionary measures taken are sufficient or should do more to prevent damage to the workers there (Peter Chemweno, 2002). Some work accidents result in permanent or potentially fatal injuries and affect work by production lost, damaged machinery, etc.

Work employer is legally required to assess risks at the workplace so that a plan can be developed to combat these risks as they occur. The risk assessment process is easy to implement; small enterprises do not need a specialist to reverse while large structures require a security and safety expert. There are some specific steps for risk management which must be done upon making a risk management model as the following;

• Risk identification to identify risks that are important to identify events that may lead to problems and therefore can begin to identify risks from the source of problems or the problem, or when the problem or its source is known, the incidents that result from this source or that may lead to a problem can be investigated.
• Qualitative and quantitative risk assessment in terms rate of occurrence and severity of results. Since the statistical information about the past incidents may not be available or accessible as well as evaluating the losses may be difficult in case of intangible assets like reputation.

 

• Risk response planning where risk management is being planned for the project in question. The plan should include tasks, responsibilities, activities as well as budget.
• Risk monitoring and control in terms of severity in causing the losses and their likelihood of occurrence. Sometimes these quantities are easy to measure and sometimes cannot be measured. The difficulty of risk assessment lies in determining the rate of occurrence as statistical information on past incidents is not always available. Also, an assessment of severity of results is often difficult in the case of intangible assets.

Probability	High	Medium	Medium	High	High
	Medium	Low	Medium	Medium	High
	Low	Low	Low	Medium	Medium
	Rare	Low	Low	Low	Medium
		Low	Low	Medium	High
	Impact

 

 

At ADNOC, we attach a great importance to identifying and mitigating health, safety, and environmental risks across all stages of operation to ensure that hazards are identified and minimized to the lowest possible level (ADNOC, 2015). In light of this, the methodology for occupational safety and health management within the organization that utilizes an integrated approach to occupational safety and health, known as risk management methodology consisting of a set of risk management criteria;

• System definition which was selected to defining the boundaries of the system and how the interconnects and subsystems, interfaces and other systems are done together.
• Definition of risk criteria which was selected to describe the criteria used to assess and determine the impact of occupational safety and health risks.
• Identification of occupational safety and health hazards which was selected to define the process of identifying occupational safety and health hazards of identification, identification and registration. This section discusses the importance of reviewing and studying all elements related to human resources, organizational matters and the operational environment that can negatively impact the management system.
• Occupational safety and health risk analysis which was selected to describe the various methods of occupational safety and health risk analysis.
• Occupational safety and health risk management control which was selected to define elements of occupational safety and health risk management and control methodologies.
• Occupational safety and health hazards are investigated and reported to identify the risk register and how to verify/report occupational safety and health hazards.

It is obvious that risks are identified first so that we can address them before they occur, and the methods of identifying risks are not numbered on the fingers; there are many strategies used to identify risks which in turn vary from firm to firm and from person to person. There are some possible techniques to specify risk including risk interdependencies as the following;

• Brainstorming; Each company is supposed to hold periodic meetings on a weekly or bi-monthly basis with enough time of brainstorming by all participants to determine any potential risk for any reason. Brainstorm sessions should also be activated in meetings that occur at the beginning and the end of each stage.
• Occupational safety analysis; The project is divided into several activities, and each activity is examined separately with the aim of extracting and studying risks as much as possible.
• Scenario of achieving the goal; risks can be identified from the target where the adopted scenario is being studied to achieve this goal and develop all the risks that may prevent the benefit of the company as well as to develop opportunities that help achieve the goal at less time and lower cost.
• List of previous risks; it is assumed that you have done the same project before and faced many risks, or at least you know people who have already implemented the same project. Those people may be asked about the previous risk they record as they will have a large list of risks that can be avoided in the future.
• Field tours; field tours may be right option in case the project has long time on the ground as it will help in recognizing many risks that will help in avoiding risks quickly.
• Team participation; it is important that the work team informs you about the potential risks in the project when they feel with it using suitable automated reporting mechanism as they will certainly discover risks that project owner or manager can not easily know.
• Asking expert; experts here are the persons who are not working with the team who have previous experience in such projects with enough amount of experience which will add a lot of risks that they have never thought of.
• Risk interdependencies; consisting of the overall project risks mentioned and sorted as; dependencies referring to abilities which the task needs from any outside basis to achieve productivity, and contributions referring to abilities which the task needs to bring to exterior sources that in turn impact the overall delivery capability and also affect the wellbeing of the projects.

Analyzing a risk management model to quantify risk requires a system for reporting and auditing to ensure effective hazard identification and examination and appropriate risk control measures have been taken. Periodic review is required for the policies and levels of compliance with laws in addition to the review of performance criteria to identify development opportunities. In addition, institutions are operating in a dynamic and changing environment. Therefore, it is necessary to identify the changes in the institutions and the environment in which they operate, and that appropriate adjustments have been made to the systems

Risk management at the institutional level focuses on the monitoring and analysis of risk assessment at the level of the business units, identifying the risks that are relevant to the program as whole and predicting events that may impede the achievement of WFP’s strategic objectives. The results of these analyzes are presented to the executive management group for; awareness of the risks, assurance to management that these risks are being addressed; and facilitating decision-making. It is therefore important that risk management is linked to the company’s strategic objectives. The strategic plan includes a detailed risk assessment. Risk management requires recognizing the obstacles to achieving the Organization’s objectives and taking action to avoid or mitigate those obstacles and thus relate to the identification of objectives and planned results in performance planning. Therefore, risk management processes aim to achieve objectives of the organization by supporting measurable results. Performance management determines and implements the activities required to achieve the planned results of outputs and impacts. Risk management is linked to performance objectives of determining how risk management relates to achieving, measuring, prioritizing and deciding on objectives based of pre-establish criteria.

 

 

 

Task 3

Before discussing a set of direct activities to eliminate, mitigate, deflect or accept the risk; it is important to highlight the ability of the organization itself to accept the risk. If the organization is weak in applying professional activities to eliminate, mitigate, deflect or accept the risk; these activities will be in vain. For example, International Organization for Standardization (ISO , 2009) sets some concepts of risk management principles which must be adopted by the organization prior to the actual implementation of the risk management process including; risk management must be an integral part of its organizational and decision-making processes and must be systematic taking human factors into account and based on the best available information in addition to be capable of continuous improvement and responsive to change. Some factors that help to control the risk of damage will be reviewed by some actions:

• Transfer of risk factors by facing the risk and transferring it to another party in return for paying a certain amount to this party while the owner of the object of the original risk retains the ownership of this matter pursuant to the contracts of; rent, transfer, construction, and insurance.
• Reducing of risk factors based on the prevention of danger completely if possible or reduce the resulting losses that occurred with this risk.
• Mitigation of risk factors by limit the impact of a risk, so that if it does occur, it can be easily fixed or it will have minor effects.
• Fit the severity rule of risk.
• Sharing risk with other partners by sharing it with a number of participants when it occurs (financial risks, agricultural finance portfolio).
• Surrounding or controlling the risk factors.
• Risk avoidance done by the administration by refraining from engaging in activity or investment that creates risk.
• Termination or avoidance of risk from the source
• Acceptance of risk with a simple proportion of effects with or without planning by the individual and the institution relying on themselves in the face of the effects of risk
• Confrontation of risk factors with taking necessary precautions.
• Early problem solving which makes the cost of dealing with risk less.
• Awareness of the risks of large degree which helps in effective planning of resources.
• Reducing operational costs by reducing losses and improving efficiency of operational processes.

Selecting the most suitable one of these activities for risk management strategies can vary to manage risk. Applying a combination of techniques and different strategies is important in order to better suit the nature of your project and the skills of your team.

 

 

Task 4

Disaster recovery plan is a very good approach because it could help in minimizing the cost in long term (Jones, 2016) due to the processes, policies and procedures related to preparation, restoration, and continuity of the main infrastructure needed to the enterprise or any other technology supporting the work functions after a natural or man-made disaster as a sub division of the business continuity plan. While business continuity involves planning to save all aspects of business performance in the midst of disruptive events. The term of disaster recovery plan focuses on any administrative systems or any other technology that supports business functions (Jones, 2016). There are many companies take some time to develop a disaster recovery plan and then sit down to collect losses to think about starting over. Disaster recovery plan provides a wide scope of advantages for the company including some of the following; preventing financial loss, reducing lost / interrupted time, surviving business in the event of a serious accident or interruption, maintaining important records and property information, and reducing risk of loss of work and productivity. As a part business continuity plan; there are different types of measures which can be applied into the disaster recovery plan as steps and mechanisms that can be undertaken to reduce or eliminate the various threats that the company may face at any time. The process for implementing and managing a disaster recovery plan include three types of measures which must be documented and tested regularly as follows;

• Preventive measures including factors to prevent a disaster.
• Clamping measures including factors aimed at detecting undesirable events.
• Corrective measures including factors to correct or restore the system after a disaster or event.

Upon recovering any disaster; disaster recovery team will be contacted and assembled by the emergency response team in order to perform the following responsibilities;

• Reporting to the emergency response team.
• Considering implications on other company sites.
• Restoring key services within 4 business hours of the incident.
• Ensuring that proposed contingency arrangements are cost-effective.
• Recovering to business as usual within 8 to 24 hours after the incident.
• Coordinating activities with disaster recovery team, first responders, etc.
• Ensuring that operational policies are adhered to within all planned activities.
• Establishing facilities for an emergency level of service within 2 business hours.
• Ensuring that all employees fully understand their duties in implementing such a plan.

 

 

References

ADNOC. (2015). ADNOC Group Sustainability Report 2015. Abu Dhabi : Abu Dhabi National Oil Company.

Griffin, D. (2018). Types of Business Risk. (Hearst Newspapers LLC) Retrieved January 21, 2018, from www.chron.com: http://smallbusiness.chron.com/types-business-risk-99.html

ISO . (2009). Risk Management Terminology. Geneva, Switzerland: International Organization for Standardization.

Jones, L. (2016, March 3). Disaster Recovery and Business Continuity. International Journal of Scientific & Engineering Research, Issue 3 , pp. 55-56.

Kirvan, P. (2009). IT Disaster Recovery Plan Template. Retrieved from www.TechTarget.com: https://www.it.miami.edu/_assets/pdf/security/ITPol_A135-Disaster%20Recovery%20Plan%20Example%202.pdf

Peter Chemweno, L. P. (2002, Mrach 19). Development of a risk assessment selection model for asset maintenance decision making. The International Journal of Management Science , pp. 33-42.

Rajić, A. Š. (2015, May 19). The Review of the Definition of Risk. Journal of Applied Knowledge Management, Volume 3, pp. 17-26.

Randstad UK Holding Limited. (2015, July 20). Operational risk management jobs: duties and responsibilities. Retrieved Junuary 21, 2018, from www.randstad.co.uk: https://www.randstad.co.uk/job-seeker/career-hub/archives/operational-risk-management-jobs-duties-and-responsibilities_851/