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Management |
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1. Introduction
The meaning of risk
The word 'risk' has many different meanings. The Macquarie dictionary includes the following:
noun
1. exposure to the chance of injury or loss; a hazard or dangerous chance: to run risks.
2. Insurance
o the hazard or chance of loss.
o the degree of probability of such loss.
o the amount which the insurance company may lose.
o a person or thing with reference to the risk involved in insuring them.
o the type of loss, as life, fire, theft, etc., against which insurance policies are drawn.
In risk management risk is defined as:
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the chance that something happening will have an impact on objectives
'A risk is often specified in terms of an event or circumstances and the consequences that may flow from it. Risk is measured in terms of a combination of the consequences of an event and their likelihood. Risk may have a positive or negative impact.' (Australian Standard 42360:2004)
Risk management process
"Risk management involves managing to achieve an appropriate balance between realising opportunities for gains while minimising losses. It is an integral part of good management practice an an essential element of good corporate governance." (Foreword of Australian/New Zealand Standard Risk Management AS/NZS 4360:2004).
Risk management in essence is a process of:
- Establishing the context
- Identifying the risks
- Analysing the risks
- Evaluating the risks (For example by considering the likelihood of events and the consequences or impacts of events)
- Treating the risks ( For example by avoiding the risk, controlling the risk, financing the risk, transferring the risk (eg insurance) or reducing the risk through changed work practices)
- Implement, monitor and review
- Communicating with all concerned.
Sometimes these steps are simplified. For example the Community Services Safety Pack from WorkCover describes the essence of risk management (within an Occupational Health and Safety context) as:
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1. Think - about what may effect employees and others health, safety or welfare. This step is to identify hazards and assess the risk they pose.
- 2. Talk - with employees. Consult about matters that may effect employees and others' health, safety or welfare.
- 3. Do - what is necessary to make the workplace safe. Implement risk controls.
- 4. Review - and monitor OHS measures (ensure risk controls are effective)
Types of risk management
There are many forms of risk management, for example, financial risk management, occupational health and safety risk management, crisis risk management. The emphasis and models of risk management can vary with the type of organisation. For example the construction industry has a big emphasis on risk management in relation to worker safety, whereas a financial investment agency puts emphasis on financial risk management.
In human services some areas where risk management process can be used include:
- occupational health and safety
- child protection
- service processes and quality improvement
- professional indemnity
- risk of violence
- meeting legislative requirements (eg privacy legislation, child protection legislation, etc).
Paradoxes and dilemmas
Some of the paradoxes and dilemmas in risk management:
- risk management requires that we can identify the possible risks - but sometimes we don't have the knowledge or experience to do this
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management requires that we can specify the consequences of an event - but we can't always do this
- risk management requires that we can estimate the likelihood of an event - but sometimes we don't know