Defining And Assessing Risk

DEFINING AND ASSESSING RISK

DONNY ZULFIQAR (06050001218) HERU SANTOSO (060500142Y) MUHAMMAD ALI UMAR ISMAIL (0605001617)

STRATEGIC AND OPERATIONAL RISK  The strategic risks are the issues which require companies to think on a grand scale. These risks should be tackled at board level and require strategic planning.  Strategic risks are :    

Government Action Customers Competitors New technology

 Operational risks require board involvement, but are implemented at a lower level.  Operational risk can be categorized according to when they occur. Some occur at suppliers, others at the point of production, in the distribution chain or when the product is consumed. Graph 1

STRATEGIC RISK CONT.  Government action (economic change and new legislation), companies operate in an increasingly regulated world, and government plans (both home and abroad) need to be forecasted.  Customers also bring strategic risk because their changing attitudes and expectations makes them less predictable than before.  Competition which is changing and becoming global. No market is immune from new competition, especially one which is profitable.  New technology is bringing new threats and opportunities. If managed properly, it can make the company more competitive.

OPERATIONAL RISK CONT. CLASSIFYING RISK BY TIME SUPPLIERS

PROCESS AND INTERNAL RISK

DISTRIBUTION

INTERRUPTION OF SUPPLIES

FIRE

COUNTERFEITIN PAYMENT G PROBLEMS

POOR QUALITY SUPPLIES

POLLUTION

TEMPERING

FRAUD COMPUTERS ACCIDENTS LABOUR DISPUTES

CUSTOMERS

CHANGING NEEDS PRODUCT LIABILITY

COMPETITORS COMPETITOR ACTIVITY

OPERATIONAL RISK CONT. CLASSIFYING RISK BY CAUSE  It is useful to examine the causes of risk and to see which assets they will affect. This helps the company to decide which assets are vulnerable, and how they should be protected. Graph 2

 Who is at risk?  The effects of risk sometimes ripple outwards from the single worker towards the general population. At the front line of risk is the individual worker who will be hurt if his or her clothing caught in machinery. Sometimes, several workers at a plant are hurt, for example if a train ploughs into lineside rail workers.

WHO IS AT RISK?CONT.  Beyond the factory gets, the local population is at risk. A chemical plant might send a fireball into adjoining streets, causing damage to buildings, passers-by and local office workers. Less dramatically, dust, smoke or odour from a plant can extend over the local town.  At the extreme is a risk to the general population. This is not a problem facing many companies, but it is found in energy (where power stations and their emissions cover the country). The Chernobyl accident affected populations from Russia to as far away as Welsh hill farmers, who were restricted from selling their sheep. Subsequently, if they cause the share price to fall, risks affect the shareholder.

Assessing Risks

 Assess the risks (audit and measure)  Set priorities (determine the highest priority risks)  Prevent (minimize risk, transfer risk, spread risk)  Plan (minimize the scale of problem)

Probability and Severity  A risk which has a high impact and is probable should be tackled urgently.  Severity use for multipying the probality factor.

Implementing The Assessment  Purpose of the assignment  Nature of the risk. Description of the project.  Resources involved or affected  Scale of the impact  Benefits of the hazard

Implementing The Assessment cont.     

Mitigating factors Contingency plans Limitations of the assessment Conclusions and recommendations Action taken

SIMPLER ASSESSMENTS  Gathering the information : Data gathering should start with published economic or industry spesific information.  Otherways of analyzing risk : the company can draw flow chart showing process and the movement of material through the business.  Further analysis

ASSESSING VULNERABILITY

 After the data has been gathered, the company should determine which types of threat the company is vulnerable to.

STUDY CASE FOR DEFINING AND ASSESSING RISK PT. ANTAM  As we know every company in the world must have many risks to deal with. The risk should be managed properly in order to minimize those risks and obtain profit for the company. If the company doesn’t have the ability to manage those risks the company will definitely suffer from loss.  The first way that the company can do to conduct the risks management is defining those risks, secondly is assessing those risks, third is to set priorities, fourth step is to prevent the risks from happening, and finally the last step to do is to plan for the worst.

CASE STUDY FOR DEFINING AND ASSESSING RISK PT. ANTAM 

 

For the example we take PT. ANTAM as our case study, because this kind of company usually has many risks to manage. And we will explain how PT. ANTAM defines risks and then assesses the risk to finally manage properly those risks so they can earn profit. PT. ANTAM faces many risks such as : Strategic Risks  

Government Factors : ANTAM can be affected by either positive and negative change in government, government policies, and also instability in politic, social, and law. Economic Factors : ANTAM also faces economical risks such as if the government failure in reforming financial policies that the government can not afford loan from international financial board or maybe a decrease in Indonesia economic growth.

STUDY CASE FOR DEFINING AND ASSESSING RISK PT. ANTAM 

Operational Risks 

Process and internal risks 

 



Accident, fire, pollution.

Next we will explain how PT. ANTAM manages their operational risks. Defining : In this step Antam defines the risk may that occur during their operational process such as accident (such as landslide leading to death of the employee during their job), fire, pollution, or even terrorism. Assessing : 

Every ANTAM employees have different personality and character, either obey the safety regulation or not obey the safety regulation. ANTAM has assessed that employee who doesn’t obey the safety regulation may cause accident that would affect to the company.

STUDY CASE FOR DEFINING AND ASSESSING RISK PT. ANTAM  Set priority :  In this step PT. ANTAM has realized that accident is the first priority in their risk management because it happen very probable and the severity for the company can be said as Catastrophic. If compared to Fire which is as Catastrophic as mining accident but it occurs occasionally in PT. ANTAM operational.  Prevent :  Risk Minimization such as giving training about safety regulation to the employee and also provide the best mining tools in their operation so that the company can minimize the risk of accident to happen.  Risk Transfer both the company and the workers must have an insurance.  Risk Spread by diversifying.

SIMPLER ASSESSMENT RESOURCES

SEVERITY OF THE IMPACT

PROBABILITY

SCALE OF THE PROBLEM

EMPLOYEE, MINING TOOLS, CAVE

4. DEATH, REDUCE PRODUCTION, LOSS

4. HUMAN ERRORS, LACK OF SAFETY

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KEY PROBLEM

RISK MANAGEMENT STRATEGY

SAFETY RENEWING THE REGULATION IS EXPIRED MINING NOT TOOLS, GIVING CONDUCTED TRAINING PROPERLY, ABOUT SAFETY EXPIRED MINING REGULATION TOOLS

STUDY CASE FOR DEFINING AND ASSESSING RISK PT. ANTAM  Plan for the Worst :  If the disaster or maybe the accident happens the company needs to be able to rescue itself and should have made plans before that so they can minimize the scale of the problem.  We will describe the Simpler Assessment that PT. ANTAM can use to assess their risk :

OPERATIONAL RISK CONT. CLASSIFYING RISK BY CAUSE ASSETS

CAUSE OF RISK

NATURAL DISASTER

GOVT. ACTION,ECON OMIC FORCES

SUPPLIERS

PRODUCTION PROBLEMS

THEFT AND FRAUD

VANDALISM AND REVENGE

BAD DEBTS

LABOUR DISPUTES

THEFT OF STOCK

COMPUTER VIRUS

EXAMPLE

FIRE, EXPLOSION

LAND

×

BUILDINGS

×

×

PLANT AND EQUIPMENT

×

×

CASH

×

SALES

TAX CHANGES LATE DELIVERY

CUSTOMERS

× ×

×