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available...http://books.google.ca/books/about/Management_of_risk.html?id=BcM-b4DTttcC&utm_source=gb-gplus-shareManagement
of riskManagement of risk
Page
TM I Management of Risk: Guidance for Practitioners *...*
Page i
London: TSO *...*
Page ii
â–¡ TSO Published by TSO (The Stationery Office) and available from:
Online www.
tsoshop.co.uk Mail, Telephone, Fax & E-mail TSO PO Box 29, Norwich, NR3 1GN
Telephone orders/General enquiries: 0870 600 5522 Fax orders: 0870 600
5533 *...*
Page iv
6 Perspectives 55 6.1 Introduction 57 6.2 Strategic perspective 58 6.3
Programme
perspective 61 6.4 Project perspective 63 6.5 Operational perspective 66
6.6
Achieving measurable value 69 6.7 Integrating risk management across *...*
Page v
List of figures Figure 1.1 MoR framework Figure 1.2 Organizational
perspectives
Figure 1.3 MoR's relationship with other OGC guides Figure 3.1 Relationship
between documents Figure 4.1 The management of risk process Figure 4.2 *...*
Page vi
List of tables Roles and responsibilities relevant to risk management
Techniques
to support risk management Example probability scale - 1 Example
probability
scale - 2 Example cost impact scale Example time impact scale Example *...*
Page vii
Foreword We live in an ever-changing world and to cope we all manage
risk, often
without consciously being aware that we are doing it. This can be true
in both
our personal lives and in the business environment.
Page viii
Acknowledgements This edition of Management of Risk updates the 2007
edition
with changes proposed through the Best Management Practice change
control system
. The guide captures the knowledge and experience of the authors, *...*
Page ix
Projects (Consulting) Ltd; Stephen Marks, Project Performance Consulting
Ltd;
Tim Reeks, HM Revenue & Customs; Alan Summerfield, Aspire Europe; Mike
Ward,
Outperform UK Ltd. Change control panel Mike Pears, Andrew Wood and John
*...*
Page 1
Introduction *...*
Page 3
*...* 1 Introduction 1.1 PURPOSE OF THIS GUIDE This guide is intended to
help
organizations put in place an effective framework for risk management.
This will
help them take informed decisions about the risks that affect their
strategic, *...*
Page 4
implement. Each step describes the inputs, outputs, tasks and techniques
involved to ensure that the overall process is effective. â–  Embedding and
reviewing MoR Having put in place an approach and process that satisfy the
principles, *...*
Page 5
Many of these benefits are applicable to both the private and public
sectors.
Whereas the private sector focuses mainly on shareholder returns and the
preservation of shareholder value, the public sector's role is to
perform *...*
Page 6
should maintain sound risk management and internal control systems and
review
the effectiveness of these at least annually. Regarding internal
control, the
current UK Guidance for Directors (2005) states that the board's
deliberations *...*
Page 7
future. It is, therefore, essential to review these decisions and
associated
risks regularly. â–  Medium -term goals are usually addressed through
programmes
and projects to bring about business change. Decisions relating to
medium-term *...*
Page 9
an approach to performing risk management health checks, and Appendix D,
which
describes risk management maturity models. Chapter 6 explains when and
how MoR
principles, concepts and processes should be applied throughout an *...*
Page 11
I PI 4 IP â– Kil ff Management of risk principles *...*
Page 13
*...* 2.1 INTRODUCTION The purpose of the Management of Risk (MoR) guide
is to
provide a framework for risk management that can be applied to any
organization
regardless of its size, complexity, location, or the sector within which
it *...*
Page 14
Risk appetite is the amount of risk the organization, or subset of it, is
willing to accept. It is risky for an organization to have a risk appetite
greater than the risk capacity. To ensure that risk appetite for
organizational *...*
Page 15
actions. The chance of being able to deal with resistance that may exist
clearly
improves if this resistance is understood. Risk management must
recognize the
capabilities, perceptions and intentions of external and internal people
that *...*
Page 17
Culture is understood here to mean 'the way things are done'. A supportive
culture is one that embeds risk management into day-to-day activities,
where
senior managers demonstrate through policies and actions that risk
management is *...*
Page 19
Management of risk approach *...*
Page 21
*...* 3.1 INTRODUCTION The way in which the principles described in the
previous
chapter are implemented will vary from organization to organization.
Collectively the principles provide a foundation from which the risk
management
approach *...*
Page 22
It can contain a detailed description of the risk management process or
present
a high-level view, with a fuller description being provided in a separate
process guide document. For larger organizations a policy may have
several *...*
Page 23
3.6 ISSUE REGISTER The purpose of the issue register is to capture and
maintain
information in a consistent, structured manner on all of the identified
issues
that are happening now and require action. Although issue resolution is
not *...*
Page 25
causes of other future risk events. A systematic way of linking risk
management
and issue resolution processes must be found, but without mixing the two
in a
way that defies effective management of actual problems from management
of *...*
Page 29
*...* 4.1 INTRODUCTION This chapter describes the MoR process. It is
divided into
four primary steps known as: â–  Identify â–  Assess â–  Plan â–  Implement.
Collectively these steps form a logical sequence necessary for robust *...*
Page 30
MoR process Mapping to The Orange Book process - the risk management
model Risk
environment/context The extended enterprise Figure 4.2 Comparison of the
steps
within the MoR process and The Orange Book *...*
Page 31
Inputs Goals Process step Tasks Outputs Techniques Figure 4.3 How each
process
step is defined 4.2 COMMON PROCESS BARRIERS There are a number of
barriers or
constraints common to the implementation of all the steps in the risk *...*
Page 33
â–  What constraints are relevant to the activity â–  How complete the
information
is â–  Who the stakeholders are and what their objectives are â–  Where the
activity fits in relation to the organizational structure â–  The
organization's *...*
Page 34
Risk management policy The approach adopted for the context step should
reflect
the risk management policy and the required approach to management of risk,
including recognition of the organization's risk appetite.
Page 35
Table 4.2 Context outputs Output Explanation Activity analysis As a
result of
reviewing the planned activity it may be necessary to prepare a series
of notes.
For example, any assumptions made while interpreting the information
examined *...*
Page 36
*...* 4.4.5 Context tasks The process tasks will involve the examination
of the
activity information available. The information examined will vary
according to
the type of activity and whether it relates to the strategic, programme,
*...*
Page 37
Table 4.4 Identify the risks inputs Table 4.5 Identify the risks outputs
Output
Explanation Risk register Early warning indicators for KPIs The content
of the
register needs to be tailored to the activity undertaken.
Page 38
4.5.4.4 Group techniques, including brainstorming, nominal group
technique and
Delphi technique There are a number of techniques that can be used in
workshops
with groups and that are designed to leverage the fact that groups of *...*
Page 39
Table 4.6 Identify the risks tasks Review clarity Take time to ensure
that the
threat and opportunity descriptions are as clear and full as possible so
that
when they are revisited at a later date the meaning behind the
descriptions is *...*
Page 40
*...* Inputs Risk register Early warning indicators Techniques Probability
assessment Impact assessment Proximity assessment Expected value assessment
Outputs Risk register Scales to aid the assessment of probability are
included
in the *...*
Page 41
Revisit the risk identification step if any of the threat or opportunity
descriptions are insufficiently clear to be able to assess them, or they
require
rewording to reflect recent events. Assess the probability and impact of
the *...*
Page 42
This is a simple mechanism to increase visibility of risks. It is a
graphical
representation of the information found in the risk register. Summary risk
profiles are often referred to as risk assessment matrices, probability
impact *...*
Page 43
understand alternative strategies quickly prior to decision-making. It
is also
useful in the plan step of the process. 4.7.5 Evaluate tasks The
activities in
the evaluate step are the tasks necessary to capture the right
information to *...*
Page 44
4.8.1 Plan inputs The inputs to the plan step are the documents and other
information from the previous process steps that will enable effective
decision-
making in planning responses to risks, whether they are threats to be
removed or *...*
Page 45
also to identify and describe any secondary risks that exist following the
response, ie threats or opportunities caused by the response action. 4.
8. 3. 2
Cost- benefit analysis Some risk responses are planned without doing a
formal *...*
Page 46
*...* Inputs Risk owner Risk actionee Risk register Risk response plan
Techniques
Update summary risk profiles Risk exposure trends Update probabilistic risk
models Outputs Risk progress reports 4.9.2 Implement outputs The outputs
of the *...*
Page 47
Table 4.17 Implement outputs Output Explanation Risk progress reports
The key
outputs will be risk progress reports including some or all of the
suggested
content in Appendix A. The time, energy, effort and finances expended in
the *...*
Page 49
Embedding and reviewing management of risk *...*
Page 51
*...* 5.1 INTRODUCTION The purpose of this chapter is to introduce the
need for
the integration of risk management into the culture of the organization, to
explain how this can be achieved and to highlight the need for regular
review, *...*
Page 54
*...* The inclusion of risk responsibilities and activities in job
descriptions,
objectives and staff appraisals â–  Delivering information on risk
management as
part of new staff inductions (this will help ensure new staff understand
the *...*
Page 55
Perspectives *...*
Page 57
6 Perspectives 6.1 INTRODUCTION In the previous chapters, the principles,
approach and generic process for undertaking risk management have been
described
. The way in which the principles, approach and process are applied will
vary *...*
Page 58
Change management objectives Day-to-day management objectives Strategic
risks
Programme risks t Operational risks t II Project risks Figure 6.1
Interrelationships between different organizational perspectives In
addition to
the *...*
Page 59
â–  Resource Relating to ensuring that staff and suppliers are providing the
skills and commodities required by the organization. It is critical that
risk
management within the strategic perspective is continually aligned with
objectives *...*
Page 60
6.2.4 Provides clear guidance Risk management for the strategic perspective
should be shaped by the risk management policy and process guide and is
documented in the strategic risk management strategy. The risk management
strategy for *...*
Page 61
When making a new corporate investment decision or beginning a new
corporate
planning cycle, the full risk management process should be applied. A
key output
from earlier steps will be the strategic risk management strategy, *...*
Page 62
Programme opportunities and threats are enerally identified: â–  Through the
escalation of risks from projects within the programme â–  During
programme start
-up â–  By other programmes with dependencies or interdependencies with
this *...*
Page 63
6.3.5 Informs decision-making Regular programme risk reports should be
provided
to the SRO and programme manager. Additional summary risk reports (eg risk
progress reports) may be produced at key decision points such as at the
end of *...*
Page 64
â–  To specification â–  On time â–  Within budget. 6.4.2 Fits the context The
project perspective maintains a view of successfully delivering a
predefined
output or product and, as a consequence, enabling the delivery of business
benefits *...*
Page 65
perspective if the level of risk cannot be brought under control and the
project
is part of a programme or to the strategic perspective if the project is
not
being managed as part of a wider programme. Risk management is a key
tool in *...*
Page 67
operational risk profile within an organization, including the use (or
lack) of
a standardized approach, management endorsement, employee awareness and
education, the attitude to risk within the organization, risk appetite
and the *...*
Page 68
â–  Identify any additional benefits associated with adopting management
of risk
for the operations/services covered â–  Confirm the scope of the strategy (eg
applied to a single service or a range of operational services) â– 
Identify the *...*
Page 69
â–  Establishing and maintaining the operational risk management strategy
and the
operational risk register â–  Helping to balance operational opportunities
and
threats relative to the cost implications â–  Providing assurance of the *...*
Page 70
Table 6.1 Roles and responsibilities relevant to risk management Writes,
owns
and assures adherence to the risk management policy Defines the overall
risk
appetite Reviews the risk management strategy Approves funding for risk
*...*
Page 71
Role Responsibilities The senior manager appointed to represent the
senior team
(Could be referred to as the sponsor, SRO, executive or other labels as
relevant
to the organization) Ensures that appropriate governance and internal *...*
Page 72
Table 6.1 continued Role Responsibilities Risk specialist (If the role
does not
exist as part of the organization the responsibilities rest with the
manager to
resource the role appropriately) (Could also be called a risk
practitioner, *...*
Page 73
Appendix A: Management of risk document outlines *...*
Page 75
*...* This appendix describes the purpose of the documents required to
implement
MoR and details their contents. The composition of each document should be
aligned with the objectives and tailored to the context of the
organization and *...*
Page 76
thresholds for an organizational activity will then be embedded in the risk
management strategy for that activity. Procedure for escalation and
delegation
This section will describe the escalation procedure and delegated
procedure to
be *...*
Page 77
A.2 RISK MANAGEMENT PROCESS GUIDE A. 2.1 Purpose and composition The risk
management process guide describes how an organization intends to carry
out risk
management and the role and responsibility of people who perform risk
management *...*
Page 80
Risk status The most commonly adopted terms to describe the status of a
risk are
: â–  Active The risk is still live and relevant to the organizational
activity
â–  Closed Either the risk can no longer happen or have an impact on the *...*
Page 85
*...* B.1 INTRODUCTION This appendix provides more details on the
techniques
listed in each step of the MoR process. It is not an exhaustive list and
other
techniques may be used or alternative names given to common techniques.
Page 86
Table B.1 Techniques to support risk management Process step Techniques
associated primarily with this process step Process steps where
technique could
also be useful Identify - context Stakeholder analysis PESTLE analysis SWOT
analysis *...*
Page 87
Stakeholder 1 2 3 4 5 Responsible Accountable Consulted Informed Figure
B.2 An
example of an RAG diagram *...*
Page 88
*...* B.2.2 PESTLE analysis PESTLE analysis will help to capture
understanding
about aspects of the context by using the prompts political, economic,
sociological, technological, legal and environmental. It is a technique
that
facilitates *...*
Page 91
Table B.6 Example requirements impact scale Impacts on an organizational
activity must be considered in terms of the organizational objectives.
Impact
areas must be defined in the identify - context step of the process and
suitable *...*
Page 92
*...* A risk prompt list, as described by the first edition of the
Project Risk
Analysis and Management Guide: PRAM (APM, 1997), is a list that
'categorizes
risks into types or areas'. The HM Treasury guide known as The Orange
Book (2004
) *...*
Page 95
B.4 TECHNIQUES FOR THE ASSESS - ESTIMATE STEP The estimate step is
concerned
with assessing the probability of threat and opportunity events
materializing
and their respective impact should they materialize.
Page 97
Table B.8 Expanding RAG status for reporting within a particular
activity. The
parameters of the risk tolerance line should be agreed at the outset of an
activity and regularly reviewed. The use of an extended Red Amber Green
(RAG) *...*
Page 98
each of the threats and opportunities and the modelling of variability.
It will
also be influenced by the choice of probability distribution selected to
represent each variable (threat or opportunity) and their
interrelationship -
see *...*
Page 99
Figure B.8 Range of outcomes, and the probability of achieving an
objective (
based on a Monte Carlo simulation) P90 overrunning (ie the impact on
project B
when project A overruns). Note that it is possible to calculate
separately the *...*
Page 100
Time overrun Project A overruns Cost overrun 4 Resources not released to B
Resources released on time to B Extra funding for Project A No extra
funding for
Project A Project B is descoped Project B is delayed Project B buys in
additiona *...*
Page 103
such as impact on reputation. The technique forces a focus on all the
costs and
benefits, however, and supports judgement and decision-making. As
referred to in
Table B.9, some risk responses are planned without carrying out a formal
*...*
Page 104
Figure B.11 Example of a scatter diagram *...*
Page 105
Appendix C: Management of risk health check *...*
Page 109
â–  Have stakeholders been provided with timely, specific and clear
information
about risks, particularly when a new major activity is being proposed or
objectives changed? â–  Have stakeholder objectives for an activity been
captured
, *...*
Page 112
Is an adequate budget for embedding and executing risk management
available? Are
effective practices, productive behaviours and investments in risk
management
identified and rewarded? Is there a corporate process for identifying
good *...*
Page 113
Appendix D: Management of risk maturity model *...*
Page 115
*...* D.1 INTRODUCTION The purpose of this appendix is to introduce the
subject of
maturity models, their use, composition and benefits. Maturity models are a
valuable tool in enabling organizations to benchmark their current risk
*...*
Page 116
*...* Competencies Attained or desired capabilities Maturity model
Constructed as
a matrix Levels Sequence for developing capabilities Criteria Primary risk
management practices Figure D. 1 Inputs to a maturity model D.5 SCOPE
The *...*
Page 119
Level 4 Managed Level 5 Optimizing developed, refined and disseminated.
Central
risk function is established Senior management reports in a consistent
format.
Audit reports. Prioritized actions MoR is routinely used to support *...*
Page 121
management need to treat implementation as a project in itself, which
requires
establishing clear objectives and success criteria and undertaking proper
planning, resourcing and effective monitoring and management.
Page 122
D.14 MORE INFORMATION ON THE OGC P3M3 This section provides a summary of
the
Portfolio, Programme and Project Management Maturity Model (P3M3®),
developed by
the Office of Government Commerce (OGC). This maturity model identifies
five *...*
Page 123
Table D.4 P3M3 risk management process perspective Maturity Portfolio
description Programme description Project description Level 1 There is
growing
recognition that risks need to be managed and that, at least for key
business *...*
Page 127
*...* The purpose of this appendix is to provide introductions to some risk
specialisms and direct the reader to more detailed information on these
specialisms. The specialisms covered are: â–  Business continuity
management â– 
Incident *...*
Page 128
and safety at work is so important, there are rules, which require
everyone not
to put themselves or others in danger. The law is also there to protect the
public from workplace dangers. Further information on health and safety
*...*
Page 129
E.7 REPUTATIONAL RISK MANAGEMENT Reputation is one of the most important
assets
of most organizations and, accordingly, reputational risk is one of the
main
concerns for risk managers. A reputational risk occurs when an
organization is *...*
Page 134
and control systems, have been put in place to protect assets, earnings
capacity
and the reputation of the organization. disaster recovery planning A
series of
processes that focus on *...*
Page 141
Index Note: Page numbers in italics refer to figures. The abbreviation
MoR is
used for Management of Risk. accounting officers 60 achieves measurable
value
see measurable value activity analysis 35, 37 documents 34 aligns with *...*
Page 143
plan step 44 internal control 5-6 interviews 38, 94 ISO31000: 2009 (
international standard for risk management) 3, 13 issue register 23,
24-5, 80-1
key performance indicators (KPIs) 15-16 in documentation 76, 78 identify -
identify the *...*
Page 144
process guide 22, 77 process measures 69 process of MoR 3-4, 29-31, 29,
30, 31
assess - estimate step 38-41, 86, 95 assess - evaluate step 41-3, 86, 95-9
common barriers 31, 53-4 communication throughout 31-2 in documentation
76, *...*
Page 145
tasks 30 assess - evaluate step 43 identify - context step 35-6 identify -
identify the risks step 38, 39 implement step 47 plan step 45 team role
70, 72
techniques 30 assess - estimate step 39-40, 86, 95 assess - evaluate
step 42-3, *...*
Page 148
Management of risk is critical to an organization's success. Informed risk-
taking helps to improve performance through the use of innovative
approaches for
managing business and service delivery. This publication sets out a
framework *...*
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The Stationery Office
<http://books.google.ca/url?id=BcM-b4DTttcC&pg=PA105&q=http://www.tsoshop.co.uk/bookstore.asp&clientid=ca-print-stationery_office&channel=BTB-ca-print-stationery_office+BTB-ISBN:0113312741&linkid=1&usg=AFQjCNGPrp1H8aN3wcn6D3Wpo96UZTFF3w&source=gbs_pub_info_r>
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<http://books.google.ca/books?id=BcM-b4DTttcC&printsec=copyright&source=gbs_pub_info_r>. 

	
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