Risk Management Presented By: Prof. Dr. Samir Afifi

Risk ManagementRisk ManagementRisk ManagementRisk Management

Presented By:Prof. Dr. Samir Afifi

What Is “Risk”?“Risk is a condition in which there is a

possibility of an adverse difference from a desired outcome that is expected … .”

“… the threat that any event or action will adversely affect an organization’s ability to achieve its business objectives and execute its strategies.”

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Why manage risks?

It is a fact of life that chance

events will occur and affect the

outcome of your system or project

If anything can go wrong, it will!

Of things that could go wrong, the

one that causes the most damage

will occur!

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Risk during the projectRisk and the associated cost to address the risk,

varies over the project life cycleFor initial phase there is high chance of risk events, but low cost impactFor final phase there is low chance of risk events, but cost impact is high

Identifying and managing risks will greatly affect project success

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Risk Management: Is the name given to a logical

and systematic method of identifying, analyzing, treating and monitoring the risks involved in any activity or process.

What is Risk Management?What is Risk Management?What is Risk Management?What is Risk Management?


Risk Management:Is a methodology that helps managers make best use of their available resources


A decision making tool, that can be used by everyone, to increase personal awareness by anticipating hazards & reducing the potential of injury or death, thereby increasing the probability of a long life.



Good management practice

Process steps that enable improvement in decision making

A logical and systematic approach

Identifying opportunities

Avoiding or minimizing losses


Risk Management Definition of Terms

Nine Terms1. HAZARD:

Any real or potential condition that can cause injury, illness, or death of personnel or damage to or loss of equipment, property, or mission degradation/ interferes with liberty.

Risk Management Definition of Terms Continued

2. RISK: Chance of hazard or bad consequences; exposure to chance of injury or loss. Risk level is expressed in terms of hazard probability and severity.

3. EXPOSURE: The frequency and length of time subjected to hazard.

4. PROBABILITY: The likelihood that and event will occur.


5. SEVERITY: The expected consequence of an event in terms of degree of injury, property damage, or other impairing factors (will it leave a mark, will I get in trouble, adverse publicity, etc.)

that could occur.


6. CONTROLS: Actions taken to eliminate hazards or reduce the risk.

7. RISK ASSESSMENT: The identification and assessment of hazards.


8. RESIDUAL RISK: The level of risk remaining after controls have been identified and selected for hazards that may result in loss of life, injury or property damage. (Reduce the hazard / risk to an acceptable level or until it cannot be practically reduced further.)


9. RISK DECISION: The decision to accept or not accept the risk(s) associated with an action; made by the commander, leader, or individual responsible for performing that action.


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Risk Management

• practices are widely used in public and the private sectors,

• covering a wide range of activities or operations.

These include:

Who uses Risk Management?Who uses Risk Management?Who uses Risk Management?Who uses Risk Management?

• Finance and Investment

• Insurance

• Environment

• Health Care

• Public Institutions

• Governments

• Finance and Investment

• Insurance

• Environment

• Health Care

• Public Institutions

• Governments

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Effective Risk ManagementEffective Risk Management

1. Is a recognized and valued skill.

2. Educational institutions have formal study courses and award degrees in Risk Management.

The Risk Management process is well established. (International RM process standards.)


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Risk Management isnow an integral part of business planning.


The Risk Management process steps are a broad guide for any organization, regardless of the type of business, activity or function.

How is Risk Management used?How is Risk Management used?How is Risk Management used?How is Risk Management used?

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There are

77 steps in the RM

process

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The basic process steps are:

Establish the contextEstablish the context

Identify the risksIdentify the risks

Analyze the risksAnalyze the risks

Evaluate the risksEvaluate the risks

Treat the risksTreat the risks

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‘Risk’ is dynamic and subject to constant change, so the process includes continuing:

Communication & consultationCommunication & consultation

Monitoring and reviewMonitoring and review

and

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The Risk Management process:

The strategic and organizational context in which risk management will take place.

For example, the nature of your business, the risks natural in your business and your priorities.

Communicate & consultCommunicate & consult


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Communicate & consultCommunicate & consultMonitor and reviewMonitor and review

Defining types of risk, for instance, ‘Strategic’ risks to the goals and objectives of the organization.

• Identifying the stakeholders, (i.e.,who is involved or affected).

• Past events, future developments.


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Analyse the risksAnalyse the risks

How likely is the risk event to happen? (Probability and frequency?)

What would be the impact, cost or consequences of that event occurring? (Economic, political, social?)

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Rank the risks according to management priorities, by risk category and rated by probability and possible cost or consequence.

Determine inherent levels of risk.

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Develop and implement a plan with specific counter-measures to address the identified risks.

Consider:

• Priorities (Strategic and operational)

• Resources (human, financial and technical)

• Risk acceptance, (i.e., low risks)

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Document your risk management plan and describe the reasons behind selecting the risk and for the treatment chosen.

Record allocated responsibilities, monitoring or evaluation processes, and assumptions on residual risk.



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Risk Management policies and decisions must be regularly reviewed.

Risk Management policies and decisions must be regularly reviewed.

Monitor and reviewMonitor and review

In identifying, prioritising and treating risks, organisations make assumptions and decisions based on situations that are subject to change, (e.g., the business environment, trading patterns, or government policies).

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Risk Managers must monitor activities and processes to determine the accuracy of planning assumptions and the effectiveness of the measures taken to treat the risk.

Methods can include data evaluation, audit, compliance measurement.


Monitor and reviewMonitor and review

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Analyse the risksAnalyse the risks



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StrategicStrategic

Risk management can beRisk management can be strategic, operational or tacticalstrategic, operational or tacticalRisk management can beRisk management can be strategic, operational or tacticalstrategic, operational or tactical

Strategic:Strategic: Risks to Customs goals and objectives, e.g., prohibitions and restrictions, (social or economic), health,revenue, environment.

Strategic:Strategic: Risks to Customs goals and objectives, e.g., prohibitions and restrictions, (social or economic), health,revenue, environment.

- usually longer term strategies

- usually longer term strategies

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OperationalOperational

Operational:Operational: Decisionsand action planson measures taken to deal with the assessed risks.Deployment of resources; monitoring and review.

Operational:Operational: Decisionsand action planson measures taken to deal with the assessed risks.Deployment of resources; monitoring and review.

- medium term strategies

- medium term strategies

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TacticalTactical

Tactical:Tactical: Used byofficers at their workplace, to deal with immediate situations, working withinset parameters andto approved procedures.

Tactical:Tactical: Used byofficers at their workplace, to deal with immediate situations, working withinset parameters andto approved procedures.

- short term strategies

- short term strategies

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• Economic benefits, by facilitating the Economic benefits, by facilitating the movement of goods, ships, aircraft and movement of goods, ships, aircraft and people – when rated low risk.people – when rated low risk.

• Makes more effective use of existing Makes more effective use of existing skills and experience – giving better skills and experience – giving better results.results.

• Improves the quality of Customs controls Improves the quality of Customs controls – information and accountability.– information and accountability.

Why you should use Risk Management:Why you should use Risk Management:

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The process helps The process helps Administrations focus on Administrations focus on priorities and in priorities and in decisions on deploying decisions on deploying limited resources to deal limited resources to deal with the highest risks.with the highest risks.

Why you should use Risk Management:Why you should use Risk Management:

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The first step is to look at your Customs The first step is to look at your Customs context. context.

• What is the role of Customs?What is the role of Customs?

• What are your national priorities and the What are your national priorities and the expectations of the government and the expectations of the government and the public?public?

• What is the nature of your operational What is the nature of your operational environment?environment?

Where do you start?Where do you start?Where do you start?Where do you start?

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How do you use it in Customs?How do you use it in Customs?How do you use it in Customs?How do you use it in Customs?

The next steps in the Risk Management The next steps in the Risk Management process are to:- process are to:-

• Identify the risks Identify the risks

• Analyse the risks; andAnalyse the risks; and

• Evaluate the risks,Evaluate the risks,

… … but, if you are just starting on Risk but, if you are just starting on Risk Management planning:Management planning:

Where does the information come Where does the information come from?from?

Where does the information come Where does the information come from?from?

Who does this?Who does this?

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Responsibilities must be allocated:Responsibilities must be allocated:

•Appoint a Risk Management champion Appoint a Risk Management champion with appropriate qualifications, including with appropriate qualifications, including experience and analytical skills.experience and analytical skills.

•Form a Risk Management Committee, Form a Risk Management Committee, representative of operational areas.representative of operational areas.

•Conduct Risk Management Workshops.Conduct Risk Management Workshops.

•Determine operating procedures. Determine operating procedures.

Who does the Risk Assessment?Who does the Risk Assessment?Who does the Risk Assessment?Who does the Risk Assessment?

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After identifying and analysing After identifying and analysing the risks, you can evaluate.the risks, you can evaluate.

• What is the likelihood of the risk What is the likelihood of the risk event occurring? event occurring?

Evaluate the risksEvaluate the risksEvaluate the risksEvaluate the risks

•Almost Almost certaincertain

•LikelyLikely•ModerateModerate•UnlikelyUnlikely•Rare?Rare?

•Almost Almost certaincertain

•LikelyLikely•ModerateModerate•UnlikelyUnlikely•Rare?Rare?

What is the What is the consequencconsequence if the risk e if the risk

event event occurs?occurs?

What is the What is the consequencconsequence if the risk e if the risk

event event occurs?occurs?

•ExtremeExtreme•Very highVery high•ModerateModerate•LowLow•NegligibleNegligible??

•ExtremeExtreme•Very highVery high•ModerateModerate•LowLow•NegligibleNegligible??

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You need to describe or to quantify You need to describe or to quantify exactly what the ‘Likelihood’ and exactly what the ‘Likelihood’ and ‘Consequence’ terms means to you.‘Consequence’ terms means to you.

This helps in ensuring a consistent This helps in ensuring a consistent (unfailing) approach in future risk (unfailing) approach in future risk assessment and review and assessment and review and monitoring.monitoring.

It promotes a common understanding It promotes a common understanding within the Administration.within the Administration.


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After establishing ‘After establishing ‘LikelihoodLikelihood’ and ’ and ‘‘ConsequenceConsequence’ you can use a table like ’ you can use a table like this to set a level of risk.this to set a level of risk.


Extreme Very high Moderate Low Negligible

Almost certain

Severe Severe High Major Moderate

Likely Severe High Major Significant Moderate

Moderate High Major Significant Moderate Low

Unlikely Major Significant Moderate Low Very low

Rare Significant Moderate Low Very low Very Low

You must define what these risk levels mean to You must define what these risk levels mean to you.you.

You must define what these risk levels mean to You must define what these risk levels mean to you.you.

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Low and very low level risks can normally Low and very low level risks can normally be accepted, subject to on-going be accepted, subject to on-going monitoring.monitoring.

All other risks are included in the All other risks are included in the management plan.management plan.

The plan catalogues the risks, the level The plan catalogues the risks, the level of risk, and describes a treatment. of risk, and describes a treatment.

The treatment is the action proposed, The treatment is the action proposed, (and perhaps the resources allocated).(and perhaps the resources allocated).

Treating the risksTreating the risksTreating the risksTreating the risks

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TargetedselectionsTargetedselections

Development ofDevelopment of Risk Profiles

Development ofDevelopment of Risk Profiles

PhysicalPhysicalexaminationexamination

PhysicalPhysicalexaminationexaminationIndustry auditsIndustry audits

RandomRandomexaminationsexaminations

RandomRandomexaminationsexaminations

ComplianceimprovementCompliance

improvement

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Risk Profiles are developed as a means of putting risk management into practice at the Operational level.

A Risk Profile is normally specific to a Customs office. It describes:

• The risk areas• Assessment of the level of risk• The countermeasures adopted• Activation date and review dates• Means of measuring effectiveness.

A Risk Profile is normally specific to a Customs office. It describes:

• The risk areas• Assessment of the level of risk• The countermeasures adopted• Activation date and review dates• Means of measuring effectiveness.

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Using the profile information, consignments of goods, means of transport and people are targeted.

The profile information is used as the basis for Selection Criteria.

Documents received and processed by Customs, i.e., cargo and passenger manifests, goods declarations, are compared against the Selection Criteria

Documents received and processed by Customs, i.e., cargo and passenger manifests, goods declarations, are compared against the Selection Criteria

Selection Criteria

Selection Criteria

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Selections are made by manual checks of documents, or by using automated systems.

Selected transactions or movements are subject to the actions detailed in the profile or plan, e.g., physical examination, audit, etc.

Selection Criteria

Selection Criteria

Documentsand Data

Documentsand Data

Selected movements

Selected movements

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Monitor & ReviewMonitor & ReviewMonitor & ReviewMonitor & Review

The initial assessment made of the existence and level of risks must be evaluated on a regular basis.

You need to measure the effectiveness of risk profiles and update as necessary.

• Reliable reporting of examination Reliable reporting of examination resultsresults

• Reliable reporting of examination Reliable reporting of examination resultsresults

• Compliance measurement activitiesCompliance measurement activities• Compliance measurement activitiesCompliance measurement activities

• Feedback from the business Feedback from the business communitycommunity

• Feedback from the business Feedback from the business communitycommunity• Results analysis and data comparisonsResults analysis and data comparisons• Results analysis and data comparisonsResults analysis and data comparisons

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The starting point is the The starting point is the Action PlanAction Plan::

1.1. Allocate responsibilities, e.g., a Risk Allocate responsibilities, e.g., a Risk Management Champion and a working Management Champion and a working party.party.

2.2. Evaluate how Risk Management processes Evaluate how Risk Management processes can be best applied in can be best applied in youryour national national environment.environment.

3.3. Survey existing skills and do a training Survey existing skills and do a training needs assessment.needs assessment.

4.4. Catalogue existing sources of data or Catalogue existing sources of data or information that can help in identifying information that can help in identifying risks. risks.

Using Risk ManagementUsing Risk ManagementUsing Risk ManagementUsing Risk Management

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5.5. Flow chart existing processes. Flow chart existing processes.

6.6. Communicate and consult – within Communicate and consult – within Customs, with other Agencies, the Customs, with other Agencies, the trading community and transport trading community and transport industry.industry.

7.7. Obtain IT tools or set up processes for Obtain IT tools or set up processes for effectively operating a selectivity system.effectively operating a selectivity system.

8.8. Provide training in profiling/selectivity Provide training in profiling/selectivity skills.skills.

9.9. Test and gain confidence in the Risk Test and gain confidence in the Risk Management process. Management process.

Using Risk ManagementUsing Risk ManagementUsing Risk ManagementUsing Risk Management

Thank You شكراشكراThanThanks ks