Lesson Two: Risk Assessment at Origin
Risk assessment steps
Risk Register Template
Below is a sample risk register and risk toolkit that can be modified to suit your purpose, there is also a risk register template on Source that can be used.
Risk Treatment/Mitigation Options
When treating/mitigating a risk, there are a range of options you can consider:
- Avoiding the risk
- Taking more risk
- Removing the source of risk
- Changing likelihood
- Changing consequence
- Sharing risk
- Accepting risk
Avoiding and Accepting risk are relatively straightforward concepts. Stop the activity or be happy continuing the activity with the level of risk posed. We are using the word activity very broadly. An activity could be a job task, a project, a process or even a business unit as a whole.
Taking more risk, is associated with taking an opportunity. That is, if as a result of a risk assessment, the view of the activity was that the benefits far outweigh the risks associated with pursuing it, you may well choose to take even more risk by doing more of something, doing it faster or doing it in a “riskier” way. The decision to take more risk is a combination of your appetite for risk as well as your assessment of the capability to manage the activity under your proposed changed circumstances.
Removing the source of risk is a bit like avoiding risk, except that you are going to continue with a particular activity. You might consider it more like changing likelihood or changing consequence, however, it is there for emphasis. An example would be conducting an activity in a different geographic place due to natural hazards like fire, flood and earthquake.
Changing likelihood means taking action that reduces the probability of something negative happening or increases the probability of something positive happening. For example:
- A pressure relief valve reduces the likelihood of a vessel failing if some other part of the process has failed and cause pressure to increase to dangerous levels.
- Increasing the marketing budget to increase the likelihood of hitting sales targets.
Changing consequence means action that reduces the impact of a negative risk event or increases the impact of a positive risk event. For example:
- Installing fire protection systems reduces the consequence of fires if they occur.
- Offering compensation to a disgruntled stakeholder before they complain to a regulator.
Sharing risk occurs in everyday life. For example, an insurance contract is you sharing your financial risk with the insurer for a fee. The insurer agrees to insure you for loss above a certain threshold, provided you meet the conditions of the insurance contract.
The same when we outsource maintenance to a contractor. In this case, some of the financial risk has been outsourced to the contractor. That is the contractor has bid for the job with the aim of making a certain amount of profit. The profit may not be realised.
HOWEVER. While much of the risk is with the contractor, we are not free if financial risk. For example if the contractor goes into liquidation, there will be financial costs to replace the contractor or to reinstate our own maintenance regime.