Risk management is the identification, assessment, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives) followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities. The strategies to manage threats (uncertainties with negative consequences) typically include transferring the threat to another party, avoiding the threat, reducing the negative effect or probability of the threat, or even accepting some or all of the potential or actual consequences of a particular threat, and the opposites for opportunities (uncertain future states with benefits). Introduction A widely used vocabulary for risk management is defined by ISO Guide 73, "Risk management. Vocabulary. Risk management also faces difficulties in allocating resources. Method Principles of risk management Risk management should: Process
Related: Finance of replenishment & stewardhip
• 4. Preventing Failure - Risk Management
Operational riskAn operational risk is defined as a risk incurred by an organisation's internal activities. Operational risk is the broad discipline focusing on the risks arising from the people, systems and processes through which a company operates. It can also include other classes of risk, such as fraud, legal risks, physical or environmental risks. A widely used definition of operational risk is the one contained in the Basel II regulations. Operational risk management differs from other types of risk, because it is not used to generate profit (e.g. credit risk is exploited by lending institutions to create profit, market risk is exploited by traders and fund managers, and insurance risk is exploited by insurers). Background Since the mid-1990s, the topics of market risk and credit risk have been the subject of much debate and research, with the result that financial institutions have made significant progress in the identification, measurement and management of both these forms of risk.
Program Evaluation and Review TechniquePERT network chart for a seven-month project with five milestones (10 through 50) and six activities (A through F). The Program (or Project) Evaluation and Review Technique, commonly abbreviated PERT, is a statistical tool, used in project management, that is designed to analyze and represent the tasks involved in completing a given project. First developed by the United States Navy in the 1950s, it is commonly used in conjunction with the critical path method (CPM). History Program Evaluation and Review Technique The Navy's Special Projects Office, charged with developing the Polaris-Submarine weapon system and the Fleet Ballistic Missile capability, has developed a statistical technique for measuring and forecasting progress in research and development programs. Overview PERT is a method to analyze the involved tasks in completing a given project, especially the time needed to complete each task, and to identify the minimum time needed to complete the total project.
Minimize capital accumulation"Capital-building" redirects here. For the headquarters of the European External Action Service, see Triangle building. In a more broad sense, capital accumulation may refer to the gathering or amassing of any objects of value as judged by one's perceived reproductive interest group. Definition The definition of capital accumulation is subject to controversy and ambiguities, because it could refer to: a net addition to existing wealtha redistribution of wealth. Most often, capital accumulation involves both a net addition and a redistribution of wealth, which may raise the question of who really benefits from it most. In economics, accounting and Marxian economics, capital accumulation is often equated with investment of profit income or savings, especially in real capital goods. and by extension to: The measurement of accumulation Harrod–Domar model In macroeconomics, following the Harrod–Domar model, the savings ratio ( ) and the capital coefficient ( ) is: .
ISO 31000ISO 31000 is a family of standards relating to risk management codified by the International Organization for Standardization. The purpose of ISO 31000:2009 is to provide principles and generic guidelines on risk management. ISO 31000 seeks to provide a universally recognised paradigm for practitioners and companies employing risk management processes to replace the myriad of existing standards, methodologies and paradigms that differed between industries, subject matters and regions. Currently, the ISO 31000 family is expected to include: ISO 31000:2009 - Principles and Guidelines on ImplementationISO/IEC 31010:2009 - Risk Management - Risk Assessment TechniquesISO Guide 73:2009 - Risk Management - Vocabulary ISO also designed its ISO 21500 Guidance on Project Management standard to align with ISO 31000:2009. Introduction ISO 31000 was published as a standard on the 13th of November 2009, and provides a standard on the implementation of risk management. Scope
Managing Risks: A New FrameworkEditors’ Note: Since this issue of HBR went to press, JP Morgan, whose risk management practices are highlighted in this article, revealed significant trading losses at one of its units. The authors provide their commentary on this turn of events in their contribution to HBR’s Insight Center on Managing Risky Behavior. When Tony Hayward became CEO of BP, in 2007, he vowed to make safety his top priority. Among the new rules he instituted were the requirements that all employees use lids on coffee cups while walking and refrain from texting while driving. In this article, we present a new categorization of risk that allows executives to tell which risks can be managed through a rules-based model and which require alternative approaches. Managing Risk: Rules or Dialogue? The first step in creating an effective risk-management system is to understand the qualitative distinctions among the types of risks that organizations face. Category I: Preventable risks. Category II: Strategy risks.
Operational risk managementThe term Operational Risk Management (ORM) is defined as a continual cyclic process which includes risk assessment, risk decision making, and implementation of risk controls, which results in acceptance, mitigation, or avoidance of risk. ORM is the oversight of operational risk, including the risk of loss resulting from inadequate or failed internal processes and systems; human factors; or external events. Four Principles of ORM The U.S. Accept risk when benefits outweigh the cost.Accept no unnecessary risk.Anticipate and manage risk by planning.Make risk decisions at the right level. Three Levels of ORM In Depth In depth risk management is used before a project is implemented, when there is plenty of time to plan and prepare. Deliberate Deliberate risk management is used at routine periods through the implementation of a project or process. Time Critical Time critical risk management is used during operational exercises or execution of tasks. ORM Process In Depth 1. 2.
The complete guide to business risk ...Revalue Future valueOverview Money value fluctuates over time: $100 has a different value than $100 in five years. This is because one can invest $100 today in a bank account or any other investment, and that money will grow/shrink due to interest. An investor who has some money has two options: to spend it right now or to invest it. Therefore, to evaluate the real worthiness of an amount of money today after a given period of time, economic agents compound the amount of money at a given interest rate. The operation of evaluating a present value into the future value is called a capitalization (how much will $100 today be worth in 5 years?). It follows that if one has to choose between receiving $100 today and $100 in one year, the rational decision is to cash the $100 today. Simple interest To determine future value (FV) using simple interest (i.e., without compounding): Compound interest To determine future value using compound interest: 6% per year with half a year as compounding basis