STEPS IN RISK MANAGEMENT PROCESS:

I. RISK IDENTIFICATION
- Origin of the risk is being identified.
- Enabling the organization to study the activities and places where its resources are placed to risk.
- First task of risk management is to classify corporate task according to types
- Results of this stage are being documented in a risk register.
- Output is used as an input for risk analysis.
OBJECTIVE:
1. To ensure that all potential projects risk are identified
2. Minimize negative impact of project hiccups and maximize impact of project opportunities.
3. Provide information for the next step of the risk management process

PROCESS:
1. Creating a systematic process – begin w/ project objectives and success factor.
2. Gathering information from various resources -
3. Applying risk identification tools and technique
4. Documenting the risk
5. Documenting the risk identification process
6. Assessing the process’ effectiveness

Seven Identification Essentials

1. Team Participation – face to face interactions between project managers.
2. Repetition – Information changes as the risk management process proceeds
3. Approach – One method is identifying root cause; another is identifying essential performance functions the
project must enact
4. Documentation – leads to comprehensive and reliable solutions for specific project or future risk mngt analysis.
5. Roots and Symptoms -
6. Project Definition Risk Index – risk assessment tool helps develop mitigation programs for high risk areas.
7. Event Trees – commonly used in reliability studies and probabilistic risk assessments

II. RISK ANALYSIS

- Identify the possible threats and then estimate the likelihood that these threats will materialize.
- Should be specific and be industry specific.
- Requires drawing on detailed informations (projects plans, financial data, security protocols, forecast and etc

PROCESS:
1. Identify threats – identify the existing and possible threats that one might face.
a. Human – illness, death, injury etc.
b. Operational – disruption to supplies and operation
c. Reputational – Loss of customers
d. Procedural – Failure of accountability, internal systems or control, fraud
e. Project – over budget, delay on key task
f. Financial – Business failure, stock market fluctuations
g. Technical – advances in technology
h. Natural – Disasters or disease
 i. Political – Change in tax, public opinion
j. Structural – Dangerous chemicals, poor lighting

2. Estimate Risk – calculation of likelihood and possible impact of identified risk

Probability of event x Cost of event = Risk Value

III. RISK ASSESSMENT

- Way on which an enterprise get handle how significant each risk as to achievement of their overall goal
- Requires an assessment which is practical, sustainable and easy to understand.

IV. HANDLING OF RISK

- Ownership of risk is being transferred
- Identification of persons who’s responsible and held accountable of handling the risk.
- Person concerned when the risk arises should document it and report to the higher ups to have the early
measures to get the risk minimize.

WAYS OF HANDLING THE RISK:

a. Risk Avoidance – avoid taking or choosing of less risky business/project.
b. Risk Retention/Absorption – handling the unavoidable risk internally and absorbs it because no insurance can
take it and too expensive to cover.
c. Risk Reduction – physical reduction of risk (loss prevention); should be evaluated in the same way as other
investment projects.
d. Risk Transfer – legal assignment of cost of certain potential losses to another. (Eg insurance)