This document discusses business risk and the risk management process. It defines business risk as unexpected circumstances that could significantly impact a business's operations or finances. It then outlines a five step risk management process: 1) identifying potential risks, 2) evaluating the risks' likelihood and severity, 3) selecting control strategies, 4) implementing controls, and 5) monitoring risks and controls. It emphasizes that ongoing risk management is a core management responsibility.
3. EVERY BUSINESS FACES RISK
UNEXPECTED CIRCUMSTANCES
OF SUFFICIENT SEVERITY
TO MATERIALLY IMPACT A BUSINESS’
OPERATIONAL CAPABILITY
OR
FINANCIAL INTEGRITY
4. EVERY BUSINESS FACES RISK
UNEXPECTED CIRCUMSTANCES
OF SUFFICIENT SEVERITY
TO MATERIALLY IMPACT A BUSINESS’
OPERATIONAL CAPABILITY
OR
FINANCIAL INTEGRITY
5. EVERY BUSINESS FACES RISK
UNEXPECTED CIRCUMSTANCES
OF SUFFICIENT SEVERITY
TO MATERIALLY IMPACT A BUSINESS’
OPERATIONAL CAPABILITY
OR
FINANCIAL INTEGRITY
6. EVERY BUSINESS FACES RISK
UNEXPECTED CIRCUMSTANCES
OF SUFFICIENT SEVERITY
TO MATERIALLY IMPACT A BUSINESS’
OPERATIONAL CAPABILITY
OR
FINANCIAL INTEGRITY
7. EVERY BUSINESS FACES RISK
UNEXPECTED CIRCUMSTANCES
OF SUFFICIENT SEVERITY
TO MATERIALLY IMPACT A BUSINESS’
OPERATIONAL CAPABILITY
OR
FINANCIAL INTEGRITY
8. EVERY BUSINESS FACES RISK
UNEXPECTED CIRCUMSTANCES
OF SUFFICIENT SEVERITY
TO MATERIALLY IMPACT A BUSINESS’
OPERATIONAL CAPABILITY
OR
FINANCIAL INTEGRITY
10. EVERY BUSINESS FACES RISK
MAINTAINING A SYSTEMIC PROCESS
TO IDENTIFY
AND
CONTAIN BUSINESS RISK
IS A CORE FUNCTION
OF MANAGEMENT
11. EVERY BUSINESS FACES RISK
MAINTAINING A SYSTEMIC PROCESS
TO IDENTIFY
AND
CONTAIN BUSINESS RISK
IS A CORE FUNCTION
OF MANAGEMENT
12. EVERY BUSINESS FACES RISK
MAINTAINING A SYSTEMIC PROCESS
TO IDENTIFY
AND
CONTAIN BUSINESS RISK
IS A CORE FUNCTION
OF MANAGEMENT
13. EVERY BUSINESS FACES RISK
MAINTAINING A SYSTEMIC PROCESS
TO IDENTIFY
AND
CONTAIN BUSINESS RISK
IS A CORE FUNCTION
OF MANAGEMENT
14. EVERY BUSINESS FACES RISK
MAINTAINING A SYSTEMIC PROCESS
TO IDENTIFY
AND
CONTAIN BUSINESS RISK
IS A CORE FUNCTION
OF MANAGEMENT
15. THE RISK MANAGEMENT
PROCESS
A FIVE STEP ROUTINE
1. Discovery of Potential Loss Exposure
2. Evaluation of Likelihood and Severity
3. Selection of Control Strategy
4. Implementation of Control Strategy
5. Monitoring / Feedback / Correction
16. DISCOVERY OF POTENTIAL LOSS EXPOSURE
UNDISCOVERED LOSS
EXPOSURES MUST NOT BE
DISMISSED AS A
“COST OF DOING BUSINESS”
17. DISCOVERY OF POTENTIAL LOSS EXPOSURE
UNDISCOVERED RISK
YIELDS
UNCONTROLLED RISK
RETENTION
18. DISCOVERY OF POTENTIAL LOSS EXPOSURE
BE REALISTIC
NOT EVERYTHING THAT
CAN GO WRONG
WILL GO WRONG
19. DISCOVERY OF POTENTIAL LOSS EXPOSURE
FOCUS MANAGEMENT
ATTENTION
ON THOSE UNEXPECTED
EVENTS WHICH CAN CAUSE
MATERIAL DAMAGE
20. DISCOVERY OF POTENTIAL LOSS EXPOSURE
TYPES OF LOSS EXPOSURE
1. Property
2. Liability
3. Key Personnel
4. Net Income
21. DISCOVERY OF POTENTIAL LOSS EXPOSURE
USE ALL AVAILABLE RESOURCES
TO IDENTIFY RISKS
1. Internal Resources
2. Industry and Regulatory Resources
3. Insurers
4. Consultants
22. DISCOVERY OF POTENTIAL LOSS EXPOSURE
INTERNAL RESOURCES
1. Survey your own people
2. Consult your own history
3. Diagram your processes
4. Analyze your cash to cash cycle
5. Ask yourself “What if ………?”
23. DISCOVERY OF POTENTIAL LOSS EXPOSURE
INDUSTRY AND REGULATORY
RESOURCES
1. Professional Societies like the American Academy of
Dermatology
2. Guidelines Promulgated by your Licensure Boards
3. ASHRM – The American Society for Healthcare Risk
Management (www.ashrm.org)
24. DISCOVERY OF POTENTIAL LOSS EXPOSURE
INSURERS
1. Professional responsibility carriers provide training
courses and guidance
2. Property and casualty carriers also provide training
and guidance
25. DISCOVERY OF POTENTIAL LOSS EXPOSURE
CONSULTANTS
1. Industry-specific consultants can bring experience
and fresh eyes
2. Learn from the mistakes of others
3. Knowledge of control techniques
26. EVALUATE EACH
POTENTIAL LOSS EXPOSURE
DIMENSIONS OF RISK
1. Frequency
2. Potential Severity
3. Realistic Range of Loss
27. DISCOVERY OF POTENTIAL LOSS EXPOSURE
BE REALISTIC
NOT EVERYTHING THAT
CAN GO WRONG
WILL GO WRONG
28. EVALUATE EACH
POTENTIAL LOSS EXPOSURE
GOAL OF THE ANALYSIS?
IDENTIFY A PRACTICAL
RISK CONTROL STRATEGY
45. RISK CONTROL STRATEGIES
RETENTION/RESERVES
1. A decision to retain the financing burden of
a risk should be made only after carefully
evaluation.
2. No risk should be retained without
providing a specific and committed reserve.
46. THE RISK MANAGEMENT
PROCESS
A FIVE STEP ROUTINE
1. Discovery of Potential Loss Exposure
2. Evaluation of Likelihood and Severity
3. Selection of Control Strategy
4. Implementation of Control Strategy
5. Monitoring / Feedback / Correction
47. IMPLEMENTATION OF THE
CONTROL STRATEGY
MAKE A PLAN
1. Document the risk you have identified and the evaluation
you have made.
2. Document the reasons for your selection of a control
technique
3. Assign responsibility and set deadlines
4. Follow through
48. THE RISK MANAGEMENT
PROCESS
A FIVE STEP ROUTINE
1. Discovery of Potential Loss Exposure
2. Evaluation of Likelihood and Severity
3. Selection of Control Strategy
4. Implementation of Control Strategy
5. Monitoring / Feedback / Correction
50. THE RISK MANAGEMENT
PROCESS
MAINTAINING THE ENTERPRISE RISK
MANAGEMENT PROCESS
IS THE RESPONSIBILITY
OF THE CHIEF EXECUTIVE OFFICER
51. Douglas O. Guffey
Jaburg Wilk, PC
3200 N Central Avenue, 20th Floor
Phoenix, AZ 85012
602-248-1039
dog@jaburgwilk.com
www.jaburgwilk.com
Hinweis der Redaktion
A logical and continuous process
Contrast with entrepreneurial function of identifying business opportunity and weighing potential benefit against potential cost.
Think outside the box. A risk to property can be a risk of obsolescence. A risk to key personnel can be failure to maintain needed skills or even things like drug dependency and depression.