Risk Management - Types of Risk
Summary
TLDRThis session emphasizes the unified approach to risk management, highlighting that different types of risks—strategic, operational, security, safety, and project risks—should not be siloed but managed holistically within an organization. The speaker stresses the importance of context in assessing risk, noting that what may be a severe consequence at the organizational level could be minor at a project level. The key is to apply consistent critical success factors across the organization while recognizing that the impact of risks will vary depending on the level and objectives of each part. Effective risk management requires an integrated view and cooperation among different organizational units.
Takeaways
- 📚 Risk Management is about understanding what can go wrong, why it can go wrong, and the controls in place to mitigate it.
- 🔍 A risk is a risk, regardless of its type; the key difference lies in the context of its management within the organization.
- 🏗️ Separating risk functions such as strategic, operational, or security risks can diminish overall risk management efforts due to a lack of holistic view.
- 🌐 It's crucial to maintain a realistic view across the organization to ensure that risk management is aligned with the organization's objectives.
- 💡 Risk consequences are relative to the level of the organization; what is severe at the top may be minor at a lower project level.
- 📈 Tailoring the context of risk management to different levels of the organization is essential for effective risk management.
- 📊 Critical success factors like safety, reputation, and finance should be consistent across the organization, even though their application may vary.
- 🛠️ The same critical success factors can be applied organization-wide, but their relevance may differ depending on the specific context of each part.
- 🔑 Understanding that risk is relative and context-dependent is key to managing risk more effectively.
- 🤝 Greater cooperation between different parts of the organization is facilitated by a unified approach to risk management.
- 🚀 The ultimate goal of risk management is to achieve the desired outcomes, which is more likely with a holistic and contextual approach.
Q & A
What is the main focus of the session discussed in the transcript?
-The main focus of the session is to discuss the fundamental parts of risk and risk management, including different types of risks and the importance of managing them holistically within an organization.
Why is it problematic to separate risk management functions into different sections for different types of risks?
-Separating risk management functions can diminish efforts because it leads to a lack of an integrated view across the organization, which is crucial for effective risk management.
What is the key message about risk according to the session?
-The key message is that 'a risk is a risk,' and the only thing that changes is the context within which the risk is managed.
What are the potential consequences of not having a holistic view of risk management in an organization?
-Not having a holistic view can lead to ineffective risk management, as different parts of the organization may not cooperate or understand the overall impact of risks on the organization's objectives.
What is the role of context in risk management as per the session?
-Context is important because it helps to understand the specific circumstances and consequences of risks at different levels within the organization, allowing for tailored risk management approaches.
How does the session define the term 'risk' in the context of risk management?
-The session defines 'risk' as the potential for something to go wrong, including the causes, consequences, and the effectiveness of controls in place to deal with it.
What is the importance of understanding the consequences of risks at different levels of an organization?
-Understanding consequences at different levels ensures that risk management is appropriate and relevant to each part of the organization, preventing underestimation or overestimation of risk impact.
How can an organization ensure that its risk management program is successful?
-An organization can ensure success by adopting a holistic approach to risk management, using the same critical success factors across the organization while tailoring the context to fit different levels.
What are some examples of critical success factors that can be applied across an organization?
-Examples include safety, reputation, political, and financial understanding, as well as project-specific factors like schedule and environmental considerations.
How does the session suggest managing the different levels of consequences for risks in an organization?
-The session suggests tailoring the context of risk management to fit the scale of operations at different levels, using a consistent approach to assess and respond to risks proportionally.
What does the session suggest as the ultimate goal of effective risk management?
-The ultimate goal is to achieve greater cooperation between different parts of the organization and to manage risks more effectively by understanding that the context is what varies, not the nature of the risk itself.
Outlines
📈 Holistic Risk Management Approach
The speaker emphasizes the importance of a unified approach to risk management, highlighting that different types of risks such as strategic, operational, security, safety, and project risks should not be managed in isolation. The key message is that a risk is a risk regardless of its type, and the context in which it is managed is what varies. The speaker argues against siloing risk functions within an organization as it can lead to a fragmented view of risk and diminished management efforts. Instead, a holistic view is advocated for, where the organization considers the potential for things to go wrong, the controls in place, their effectiveness, and the consequences, all within the context of the organization's objectives.
Mindmap
Keywords
💡Risk
💡Risk Management
💡Strategic Risk
💡Operational Risk
💡Security Risk
💡Safety Risk
💡Project Risk
💡Consequences
💡Context
💡Critical Success Factors
💡Holistic Approach
Highlights
Session focuses on the fundamental parts of risk and risk management.
Different types of risk such as strategic, operational, security, safety, and project risk are discussed.
Risk management should not be siloed by type but rather viewed holistically across the organization.
The importance of understanding that risk management is about identifying what can go wrong and how to deal with it.
Risks have different causes and consequences that are seen at different levels of the organization.
Tailoring the context of risk management to different levels within the organization is crucial.
The significance of critical success factors in risk management that can be applied across the organization.
The potential for siloed risk management to diminish overall efforts and the need for a holistic approach.
The need for a realistic view across the organization to manage risks effectively.
The impact of risk events on an organization and the importance of context in assessing consequences.
The concept that a risk's consequence can vary in severity depending on the scale of operations within the organization.
The importance of aligning risk management with the objectives of the organization at each level.
The role of cooperation between different parts of the organization in achieving effective risk management.
The session's goal to provide insights that can enhance understanding and application of risk management.
The reminder that a unified approach to risk is essential for effective management and cooperation within an organization.
Transcripts
well welcome to this next
session what I want to talk about in
this session is the fundamental parts of
risk and risk management and the
different types of risk and you hear it
all the time we've got strategic risk
operational risk security risk safety
risk uh project
risk to think that those things are
different is probably leading an
organization down a path to separate out
those
functions the thing that you need to
understand around risk and risk
management is that a risk is a risk is a
risk the only thing that differs is the
context within which we manage that risk
so having a section off doing reputation
risk and another section off doing
operational risk another section doing
um strategic risk can actually diminish
your risk management efforts because
we're not seeing an alistic view across
the whole organization
so it's really important to understand
that risk management as I've said in a
previous um in a previous session is all
about what can go wrong what would cause
it to go wrong what controls we have in
place to deal with it how effective are
they what the consequences be and what
we can do about it of course the context
that we're talking about here is that
the risks are going to have different
causes they're going to have different
consequen quences those consequences are
going to be seen at different levels of
the organization so we need to make sure
that each of those levels of the
organization do have a context that is
about meeting their objectives so what I
mean by that is if the organization as a
whole sees a risk event or an event that
occurs as um if it's got greater than
the $20 million consequence well that's
seen as having a severe consequence
quence but if we try and apply that
right throughout the organization then
what we're going to find is that a 1
million doll project down below would
not even get into the spectrum of
potentially being a minor consequence
against that particular um um that
particular category or that particular
Matrix and so what we need to understand
is that $1 million project anything
greater than 200,000 might be a severe
consequence to them so we need to tailor
our context throughout the organization
but we can have the same critical
success factors applied right across the
organization safety reputation
political Financial understanding that
it will change from top to bottom in
projects we'll have things around
schedule all of those environmental all
of those can be the same right across
the organization we can use the same
critical success factors obviously some
of them might not apply to different
parts but if you look at an organization
holistically as oppos opposed to trying
to Silo our risks then you will be much
more successful in achieving the
outcomes that are sought by your risk
management program always remember a
risk is a risk is a risk the only thing
that differs is the context and if we
remember that we're going to manage our
risk a lot more effectively and we're
going to have a greater cooperation
between different parts of the
organization and that's essentially what
we're
after okay that's all for this session I
hope you've got something out of it and
let's be careful out
there
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