Lecture 4

Question 1

Draw out the Risk Management Framework

Answer 1

1. Risk Identification & Prioritization

Techniques to identify risks [KRI]
Technique to prioritise risk

2. Risk Assessment

Quantitative
Qualitative

3. Risk Treatment [judgement]
4. Risk Mitigation [Reduction]

Question 2

What is risk profile?

Answer 2

The spectrum of all risks that an organisation (or a business) is exposed to in its business operation

Question 3

Give examples of Risk Profile of an insurance company

Answer 3

Market Risk, Credit Risk, Liquidity Risk, Pension Risk, Insurance, Underwriting Risk, H&S risk, environmental risk, regulatory risk

Question 4

Define Risk Appetite

Answer 4

A subset of the all risks, that constitute the risk profile [which are primary or material to the business] and failure of managing these primary risk expose the organisation to insolvency. These risks that the organisation gives more priority to manage (with importance).

Question 5

Define risk tolerance

Answer 5

The amount (or quantity) of important risks [priority risks] a company or organization is willing to accept before initiating any action to address (and mitigate the risk)

Question 6

What is a key risk indicator (KRI)?

Answer 6

Early warning to indicate that risk tolerance is reached. This is an early warning for a potential risk

Question 7

Define Risk Target

Answer 7

Risk target is a measure that expresses the consequence of a risk in relevant terms of the project and organization concerned.

Question 8

Define Risk Analysis

Answer 8

Systematic use of available information to identify hazard and to estimate the risk to individuals, populations, property or the environment

Question 9

Define Risk Assessment

Answer 9

One step
- further of “Risk Analysis” the “Risk Assessment” is defined in terms of the following basic activities:

• identification of hazard
• analysis and evaluation of risk
• find an appropriate way to control and mitigate hazards.
• Find an appropriate the way to control and mitigate hazards. The main aim of risk assessment is to remove hazard, or reduce the risk level by adapting necessary control measures to move towards safety.

Question 10

List different risk assessment tools

Answer 10

• Brain storming
• Delphi Techniques

-HAZOP

• Structured “What-if” Technique - SWIFT
• Scenario Analysis
  Familiar tool -

Question 11

What is a Risk [Assessment] Matrix

Answer 11

• used during risk assessment to define the various levels of risk for a system or specific events
• RM is the product of harm probability (Likelihood, frequency) categories and harm severity (impact categories)
• RM is commonly used for risk assessment to define the level of risk for a system/specific events and to determine whether or not the risk is sufficiently controlled.
• The matrix almost always has two categories for assessment: likelihood (or probability) and severity

Question 11

Is risk assessment matrix qualitative or quantitative?

Answer 11

Risk assessment matrix is qualitative.

Question 12

Draw out a risk Assessment matrix

Question 13

Describe the features of risk matrix

Answer 13

A) Normally quantitative/semi-quantitative hazard analysis tool.
B) Developed in a simple and easy to understand manner.
C) Tolerable and non-tolerable ranges are clearly defined prior to developing risk matrix
D) Detailed descriptions of all consequences within the range.
E) It uses orders of magnitudes and has consistent likelihood range to cover entire spectrum of potential hazards.
F) Good guidance for effective hazard analysis in a qualitative manner and may not require prior knowledge for quantitative analysis [use common sense based on experience].
G) shall be designed in such a way that it has flexibility to adapt itself for various risk targets specific for the company project,
H) Prior software knowledge is not essential, but it could be handled with the help of software

Question 14

What are the two risk matrix components?

Answer 14

Risk Frequency
Risk Severity

Question 15

What is risk frequency

Answer 15

The likelihood of the risk
Probability of the risk

• very likely: at least once in six months
• Likely: at least once a year
• Unlikely: maybe once in a lifetime
• Very unlikely: May be 1%

Question 16

What is risk severity?

Answer 16

Severity is loosely used to indicate the impact of risk, that is consequence.

• slightly harmful (e.g. superficial cut, minor cut, etc.)
• harmful (e.g. burns, serious pains, minor fracture)
• extremely harmful (e.g. major fracture, amputation)