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8/6/2019 What is Risk and Risk Management
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What is Risk and Risk
Management
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What is Risk
Risk exists if there is something you dont want to
happen having a chance to happen!!!
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What is Risk Take 2
The probability that some event will cause an
undesirable outcome on the financial health of your
business and/or other business/family goals
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Components of Risk
Undesirable OutcomePut simply, the Undesirable Outcome is what
hurts!
- lower than expected production
- catastrophically lower production
- inability to meet cash flow
- loss of income
- catastrophic loss of income
- loss of life
- loss of buildings & other resources
- loss of health- inability to get a permit or loan
X
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Components of Risk
Event (Cause/Source of Risk)The Event is what caused the hurt:
- weather event
- injury/death of an employee
- neighbors action against you
- surplus production of milk
- widespread poor grain production
- low quality inputs
- divorce or disagreement
- downward slide in general economy
- and countless more!!!
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Family Goals& Objectives
Overall Categories of Risk
Legal Risk Price Risk
Environmental
Risk
5 Ds Risk
- Death
- Disability
- Disagreement- Divorce
- Disaster
Production
Risk
Human
Resources
Risk
FinancialRisk
Relationship/P
ublic Relations
Risk
11
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All The Potential Outcomes
The Probability of Each Outcome Occurring
Cost of Undesirable Outcomes
Said Another Way:
The more you do know and understand about
the better long term risk manager you will be.
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What is Risk Management?
Assuring An Outcome
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How???
Step 1: Be aware, identify the risks you face.
Step 2: Evaluate: the likelihood that the risk will occur, and
how bad the hurt will be if it does occur
Step 3: Decide on how you will address the risk
reduce, transfer, avoid, nothing, or some combination
Step 4: Implement What is the most frustrating words used in management?? Answer:
If I had only
Step 5: Control
Monitor to assure that what you said you would do, you did, and thatyou are getting what you want out of your your risk managementstrategies.
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Prioritizing Which Risks to
Address First
Probability ofHappening
Potential Impact
Act if cost
effective
No action
required
Immediate
action
Action
required
Small Catastrophic
High
Low
Source: Dr. Geoff Benson, North Carolina State University
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Risk Management Is An
Individual Decision
No one "right" decision
The "right" decision depends on the
characteristics of theoperation and
individual decision-maker
Risk
Revenue
1
2
3
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Risk Management
What is Risk Management?What is Risk Management?
How is Risk Management used?How is Risk Management used?
Who uses Risk Management?Who uses Risk Management?
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What is Risk Management?What is Risk Management?
Risk Management is the name given to a logicaland systematic method of identifying,analysing, treating and monitoring the risksinvolved in any activity or process.
Risk Management is a methodology that helpsmanagers make best use of their availableresources
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Who uses Risk Management?Who uses Risk Management?
Risk Management practices are widely used in publicand the private sectors, covering a wide range ofactivities or operations.
Finance and Investment
Insurance
Health Care
Public Institutions
GovernmentsRisk Management is now an integral part of
business planning.
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How is Risk Management used?How is Risk Management used?
The Risk Management process steps are a genericguide for any organisation, regardless of the typeof business, activity or function.
There are
77 stepsin the RMprocess
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How is Risk Management used?How is Risk Management used?
The basic process steps are: Establish Context
Identify risk
Analyse risk
Evaluate risk
Treat risk
Monitoring & Review
Communication & Consultation