DCSF4043:

Introduction to Risk
Management
Chapter 2
Risk Management
At the end of the lecture, student should be
able:
1. Managing risk effectively
2. Art of risk management

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 Risk management terminology:
1. Risk;
2. Risk management;
3. Hazard;
4. Threat;
5. Vulnerability;

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 Risk management terminology:
6. Likelihood;
7. Consequence;
8. Risk perception;
9. Risk management concepts; and
10. Risk management principles.

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Potential for an unwanted outcome resulting
from:
• Incident;
• Event; or
• Occurrence.
as determined by its likelihood and the
associated consequences.

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A. Process of
• Identifying;
• Analyzing;
• Assessing;
• Communicating risk and accepting;
• Avoiding;
• Transferring; or
• Controlling
to an acceptable level considering associated
costs and benefits of any action taken.
B. Determined what to do about it from among the
available alternatives, and then doing it.

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A. A natural or man-made source of harm or
difficulty;
B. Used to indicate sources of harm where
there is no deliberate intent such as natural
disaster, accidental hazmat spill, etc.

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A. A natural or man-made
• Occurrence;
• Individual;
• Entity; or
• Action
that has indicates the potential to
• Harm life;
• Information;
• Operations;
• Environment; or
• Property.
B. Intentional act with the potential to cause harm;
terrorist attack, etc.

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A. Physical feature or operational attributes
that renders an
• Entity;
• Asset;
• System;
• Network; or
• Geographic area
Open to exploitation or susceptible to a
given hazard

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A. The chance of something happening,
described in either quantitative terms of
probability or frequency, or in qualitative
terms;
B. Example:
i. The probability of “heads” appearing when
flipping coin is 50 %; and
ii. Frequency could be described as “on average,
there are serious automobile accidents at this
intersection 12 times each year.

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A. The effect of an
• Event;
• Incident; or
• Occurrence
Including but not limited to
• Death or injury;
• Property;
• Damage;
• Business loss; and
• Psychological effects.
B. Able to evaluate without consideration for the
likelihood of the event or our ability to prevent
or mitigate the effect.

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A. Subjective beliefs and/or judgments about
the characteristics and/or severity of risk.

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A. Approach problems to minimize the negative
impact:
i. Risk can be shaped and controlled but cannot be
eliminated; and
ii. Risk is managed at many different levels.

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A. Key principles:
i. Unity of effort;
ii. Transparency;
iii. Adaptability;
iv. Practicality; and
v. Customization.

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1. Types of risk;
2. Risk perception;
3. Manage Risk (Why?);
4. Roles of project risk manager;
5. Mistakes made by risk managers; and
6. Characteristics of successful risk manager.

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A. Strategic;
B. Operational; and
C. Institutional.

Internal versus External risks

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1. Imposed by external threat;
2. Example: Natural environment or human
actors;
3. Arise from flawed, poorly implemented
strategy or ineffective management;

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1. Potential to impede the successful execution
of operations with existing resources,
capabilities and strategies; and
2. Impact personnel, time, materials,
equipment, tactics, techniques, information,
technology and procedures that enable an
organization to achieve its mission.

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1. Organization’s ability to develop and
maintain effective management practices,
control systems, and flexibility and
adaptability to meet organizational
requirements.

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A. Situation: Shark attacks or Heat exhaustion;
B. Risk varies depending upon the individual.

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A. Manage risk in order to minimize the harm
suffered from consequences of risk;
B. Protect and enhance personal and
organizational interests by mitigating or
avoiding the effects of risks;
C. Distinguish between and among alternative
actions; and
D. There are constraints on resources, data and
time – risk management as useful approach.

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A. Process Architect;
B. Integrator;
C. Evangelist and educator; and
D. Honest broker.

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A. Assume that they are responsible only for
the risk process;
B. Move too quickly to advanced techniques
before establishing a sufficient infrastructure
for risk management;
C. Fail to educate and train other risk
managers; and
D. Not embrace their responsibilities to
communicate that true program risks and/or
sweep bad news under the rug.

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A. Flexible enough to accommodate
organizational changes and realities;
B. Have influence with senior leadership;
C. Communicate in a compelling and
persuasive way; and
D. Be persistent in the face of continuous
challenges and resistance.

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