Risk analysis and minimization

Trevor Slater Mast. Conf. Res.

Sen Assoc ANZIIF

General Manager - FSCL

Trevor the ever helpful employee

All great for a while.....

Then not so good and he has to go

Could a good risk analysis and risk plan have

prevented this happening?

When you are planning or on your holiday do you takes steps to insure its success?

◦ Travel insurance

◦ Itinerary

◦ Sunscreen

◦ Maps

◦ Insect repellent

◦ Pills

Why not do so for your work and other goals?

What is Risk?

In simple terms Risk is anything that may impede you from achieving your goals. It can include:

◦ the potential that actual results will not equal anticipated outcomes (risk as uncertainty)

◦ the threat of bad effects happening (risk as hazard)

Risk is made up of two factors that can be analysed and addressed to prevent or minimise the effects of risk. They are:

◦ the probability of something going wrong

and

◦ the negative consequences that will happen if it does (or impact).

Risk Analysis process

1. Identify the risks

2. What is the probability and impact of each risk - rate on a 1-5 scale

3. Is the current control sufficient?

4. Is the risk acceptable in its current form?

5. Address the risk

6. Take actions to minimise the impact of risks (controls)

Human – loss and incapacity

Operational – access to essential supplies

Reputational – customers and employees

Procedural – internal controls

Project – budget overruns

Financial – business failures

Technical – IT failure

Natural – disasters

Political – changes in laws

Structural – unsafe workplace

Important...

You must identify the risk without taking into account any current

controls.

Human: death or incapacitation of business manager / owner.

Reputational: your clients ‘bad mouthing’ you

Political: a change of Government resulting in changes to the FSP laws

Question 1: name one financial type of risk and one technical type of risk to your

business

Probability or likelihood of risk occurring

1. Remote possibility

2. Unlikely

3. Possible

4. Likely

5. Certain or unavoidable

Impact or outcome if risk occurs

1. Minimal Nil if any effect on reaching the goal

2. Some May delay reaching the goal - a small problem that can

be easily fixed

3. Medium Will possibly prevent reaching the goal – action needed

to rectify

Impact or outcome if risk occurs

4. Serious Will prevent reaching the goal – urgent action needed

5. Catastrophe Will definitely prevent reaching you goal – a major

issue that would stop you reaching the goal –immediate action needed

Impact or outcome if risk occurs

4. Serious Will prevent reaching the goal – urgent action needed

5. Catastrophe Will definitely prevent reaching you goal – a major

issue that would stop you reaching the goal –immediate action needed

High Risk

Probability 5

4

3

2

1

Low Risk 1 2 3 4 5

Impact

Important...

You must assess the risk – impact and probability - without taking

into account any current controls.

Human: death or incapacitation of business manager / owner.

Probability: 2, Impact: 5 = 7

Reputational: your clients ‘bad mouthing’ you

Probability: 3, Impact: 3 = 6

Political: a change of Government resulting in changes to the FSP laws

Probability: 3, Impact: 2 = 5

Question 2:

Rate the probability and impact of:

◦ the financial risk and

◦ the technical risk

....you identified earlier

Is there a current control?

Is it sufficient?

What controls can be put in place?

Is the risk...◦ Untreatable

◦ Avoidable

◦ Too costly to treat

◦ Transferable

Poor Risk has probably been identified but little or no control is in place or the control clearly will not positively impact the risk and/or is not in operation or documented (and staff are unaware of the control)

Fair Control only addresses the risk in part and needs expanding and/or operation and documentation (and staff are aware of the control) could be improved

Good Control addresses risk but documentation (and staff are aware of control) and/or operation could be improved

Excellent Control fully addresses risk, is documented (and staff are aware of control) and in operation

Address each risk – high ratings first

◦ Control – take actions to minimise

◦ Avoid – don’t undertake the activity

◦ Accept – out of your control / cost to control too high

◦ Transfer – have someone else undertake the task

Human: death or incapacitation of business manager / owner.

Probability: 2, Impact: 5 = 7

Reputational: your clients ‘bad mouthing’ you

Probability: 3, Impact: 3 = 6

Political: a change of Government resulting in changes to the FSP laws

Probability: 3, Impact: 2 = 5

Question 3:

Identify and action the controls for:

◦ the financial risk and

◦ the technical risk

....you identified earlier

Identify the risks

What is the probability and impact – rate each

Is the current control sufficient?

Is the risk acceptable in its current form?

Address each risk – ones with a high rating firsto Control

o Avoid

o Remove

o Transfer

Take or assign ownership of the risk

What are some of the risks to business faced by mortgage brokers?

Risk analysis and minimization

Trevor Slater Mast. Conf. Res.

Sen Assoc ANZIIF

General Manager - FSCL