Risk Management for International Standard- myassignmenthelp

Question: Discuss about theRisk Management for International Standard. Answer: Risk management can be defined as the continuous process that is used to identify and analyze exposures that may result in loss. The exposures identified are then evaluated as to their severity and appropriate mitigation measures taken. The International Risk Management Standard sets out principles that are relevant in the risk management process at different levels of decision making (Marquette University 2017). Arnesen Foster (2016, p.40) state that these include decisions made with regards to policy development, management of contracts, decisions on purchasing and outsourcing of services using matrices of probability and impact. The International Standard sets out steps that may be taken in the process of mitigating the risks and loss (Marquette University 2017). The first step is establishing the goals and loss context considerations. The hazards which are identified are evaluated after being analyzed. These may include financial risks (costs arising from claims and judgments of liability) and strategic risks (changes in management). It may also extend to operational risks (such as labour disruptions) and perimeter risks (changes in political landscape and weather). The hazards are then controlled and monitored regularly and communicated to the stakeholders. Risk management programs or systems (RMS) are centered on the costs associated with risk. The costs associated with risk include losses retained in the form of retentions and deductibles. Net proceeds from insurance and costs allocated for control of loss activities are also included. Costs of administering the program relating to mitigating loss are included as part of the costs of risk (Marquette University 2017). The expenses attached to managing the process of claims also contributes to the overall costs of controlling risk. The totality of the above costs when measured as an aggregate should results in an overall saving for the organization. This is despite some elements of the above showing net increase or decrease in cost individually. Risks Management Systems include all the programs that first seek to understand the nature and organizational impact of the risks identified (Viner 2015). This is followed by programs that incorporate practices and procedures designed to control the different forms of risks identified. This is against the backdrop that desired outcomes will have a higher probability of occurring. This is contrasted with the opposite proposition that negative or potentially undesirable outcomes will have a lower probability of occurring. Traditional systems of safety management incorporate RMS as its main function. RMS is useful for organizations in helping to formulate policies and frameworks to review and measure performance by the management. Some examples of loss exposure in organizations include property, personnel, income and civic/statutory liabilities. Techniques of risk control range from prevention (reduction of the frequency of loss), reduction (reducing severity of the loss) and avoiding activities which result in loss. Techniques which are used to finance risk exposure may include borrowing of funds to cover the risk (Frigo Anderson 2014, p.49). Losses that arise can be retained by the decision of omission or by design. The organization may also make the non-insurance contractual transfer of responsibility for payment of losses. The risk management incorporates both insurable and non-insurable losses. as far as reasonably practicable This concept of being reasonably practicable has several acronyms which essentially mean the same. HSE (2014), states that these are ALARP (as low as reasonably practicable) and SFAIRP (so far as is reasonably practicable). The principle works by weighing the risk exposure against the time, effort and financial resources that are needed to control it. This is in relation to risk which is identified at the work place as part of occupational safety (Makin Winder 2008). For purposes of objectivity, risk is defined as the probability that a hazard will cause adverse effects and the metric that is used to measure it. Hazard can be defined as anything that can result in effects which have adverse outcomes. This may include excessively loud noise which may result in loss of hearing. The use of both terms above is not intended to be prescriptive in controlling risks for business enterprises. The concept proposes to set out goals that can guide the duty-holder in the business in question. This places the onus of interpretation on the business operator to determine what can be considered as practicable reason (HSE 2014). At the same time it allows the latitude of discretion to the duty-holder within the business to make judgment based on good practice. In addition to the good practice, further mitigation measures may also be considered in mitigating the risk. The mitigation of risk should be reasonable within the context of resource expenditure. The costs attendant to reducing the risk should not exceed the benefits of potential outcomes. The application of the principle should be within the parameters of cost and financial resource expenditure and allocation. A hypothetical example will serve to put into context this principle. If organization X places the value of human life at $100,000, it may be willing to spend up to the limit of $200,000 per year in compensating for loss of life. This is against the backdrop of earnings of $1000, 000 per year. If the claims for that year exceed that figure, it may not be worth following the principle as it may impact negatively the operations of the business entity. But when forced by a regulator to compensate, it may have to adjust its base value on human life to a higher figure. This informs the need for a business to use a Cost Benefit Analysis when measuring the risk against the sacrifice needed. There are several limitations in using the concept of practical reasonable in business entities. The first is the limitation of values which are subjective and open to individual interpretation. This may involve issues of ethics and moral standards and involving balance and judgment (Carson 2012, p.396). It also requires significant analysis in order to determine the appropriate range of what is acceptable with regards to cost and benefit. What is considered as industry good practice may not be universally applied to each business as each case will have its peculiarities. The last limitation is that the principle requires trade-offs between mitigating the risk exposure and mitigation (HSE 2014). Risks that are reduced to the level of being reasonably practical will not entirely eliminate risks within the business entity. Risk management tool The event chain methodology is a component level risk management tool used to manage risks in projects (Loosemore et al.2006). It can be used as an analysis technique for work schedules in a project and as a tool to model the visual uncertainties in the project. It can be used for risk assessment and management at the same time in ensuing quality outcomes in projects (Martin 2012). The basic assumption of this tool is that unplanned for events will inevitably occur in projects despite planning well in advance. The tool then sets out to identify and manage and this events which may trigger others into a chain. The tool focuses on managing the events within the project and not the totality of the process as being continuous. There are six principles that underpin this tool as propounded below. The first principle states that activities are the original planned activity is known as the ground state. Excited states result when there are events which change the ground state. Events which resulted in excited states may carry negative and positive outcomes within projects (Intaver Institute 2017). The second principle posits that an event may trigger chains of events which may affect the project. The third principle is the use of tables and diagrams to show all the possible events individually within a project. The fourth principle is known as the Monte Carlo Schedule Risk Analysis. The analysis uses simulations which use the probabilities and impacts of events as the input data. The fifth principle identifies the critical events and chains that pose the greatest danger in negatively impacting the project. These are visualized using a sensitivity chart (Intaver Institute 2017). Critical events and chains can then be used to perform a check on reality. The sixth principle states that the measurement of performance in project is based on several factors. Probability of events occurring is dependent on the subjective judgment of the manager in charge of the project. Project buffers are included within the project in order to ensure that the project stays on course as originally planned. Event chain methodology is a useful tool in risk management for software projects which contain multiple and varied uncertainties and is collaborative in nature (Mohatashami et al, 2006, p. 20).This is useful for software projects which are large and originate from government and large corporations. The tool creates project schedules that are based on estimates of the best-case scenario. Events and chains of events are defined with their probable impact on the project. This is in relation to resource allocation and timelines. The major limitation of this tool is the focus on identified events as threats. Some events can actually have positive and beneficial outcomes on the project. The other limitation is the use of analysis which may not be practical for the project. sources of failure Sources of failure within business entities can be classified as managerial, hardware, software and human failures. Failures resulting from management deficiencies are as the result of barriers in management in decision making (Haimes 2009). Corrective action which is preventive may not be taken even when the hazard has been identified and reported. This may be an organizational culture deficiency within the organization that is exhibited in matters that deal with risk management. Hardware failures are as the result of shortcomings in the design and maintenance of hardware within the business entity. There could also be a mismatch in resource allocation for hardware purchase and task allocation. Software failures are evident in the practicality of loops of control and incidences of malware attacks which compromise the system. The compromised software system will affect all areas of operation within the business. The human error is a causal factor in most incidences that result in accidents. The human error is mostly caused by poor judgment caused by a variety of factors. These include fatigue, stress, drug and alcohol misuse and workload (Haimes 2009). The individual attitudes towards risk also contribute towards causing the human error which ends up in causing failures at the workplace. This is manifested as mistakes, lapses and slips while working. The company chosen for analysis with regards to policy, procedures and systems is BP global. The policy position on safety and risk management is No accidents, No harm to people and No change to the environment (BP 2017). This applies to all employees and contractors working with BP in order achieve zero injuries, accident and harm to the environment. The procedures spelt out in its document on procedures include administrative and emergency plans of action. There are also procedures on electrical installations, safety, handling waste and special materials. The system of risk management and safety, incorporates the internal administration of employees with regards to occupational wellbeing. Different certifications such as the ISO 14001 form part of the BP system. The main loss prevention arrangements for BP are focused on managing loss through oil spills and accident in its areas of operation. These include both offshore and onshore drilling and prospecting sites and the emergency risk communication adopted (Manuel 2014).This begins with tracking safety performance processes. This involves inspections and testing of equipment which is considered as critical to safety. Events on processes of safety on both up and downstream are continuously measured by BP. These are classified into tiers depending on the severity of risk that is posed. Past occurrences that resulted in loss of the primary containment are also measured to identify lags within its operations. BP has appointed a safety expert on safety processes on its downstream operations in order to reduce its losses. Using simulations, safer methods of drilling have been identified that reduce the probability of accidents occurring. Functional expertise is also derived from its global wells organization. The company is also actively implementing the recommendations made as the result of the Bly report which came after the Deepwater Horizon accident (Sustain Case 2017).Independent verification of organizational safety measures is undertaken with an independent consultant. Improved technology on containment and capping has led to processes that are modern and appropriate in tackling these two critical issues. BP has also appointed a process safety monitor within its operations to specifically focus on safety that reduces losses in operational accidents and spills. References Arnesen, DW, Foster, TN 2016, 'PLANNING FOR THE KNOWN, UNKNOWN AND IMPOSSIBLE - RESPONSIBLE RISK MANAGEMENT TO MAXIMIZE ORGANIZATIONAL PERFORMANCE', Journal of Business Behavioral Sciences, vol. 28, no. 1, p. 40. BP, 2017, Health, safety and environment requirements, viewed 17 August 2017, https://www.bp.com/content/dam/bp-geel/en/GeelSharedDownloads/8_6_Requirements_Health_Security_Safety_Environmental_june2014.pdf Carson, D 2012, 'Reviewing reviews of professionals risk-taking decisions', Journal of Social Welfare Family Law, vol. 34, no. 4, pp. 395-409. Available from: 10.1080/09649069.2012.753729. [17 August 2017]. Frigo, ML, Anderson, RJ 2014, 'RISK MANAGEMENT FRAMEWORK: Adapt, Don't Adopt', Strategic Finance, vol. 96, no. 1, p. 49. Haimes, Y, 2009, Risk modeling, assessment, and management, Hoboken: Wiley. HSE, 2014, ALARP at a glance, viewed 17 August 2017, https://www.hse.gov.uk/risk/theory/alarpglance.htm Intaver Institute, 2017, Event chain methodology in project management, viewed 17 August 2017, https://www.intaver.com/Articles/Article_EventChainMethodology.pdf Loosemore M., Rafery J., Reilly C., Higgins D, 2006, Risk Management in Projects, 2nd Edition, Taylor and Francis. Makin, A, Winder C, 2008, A new conceptual framework to improve the application of occupational health and safety management systems, Safety Science Volume 46, Issue 6, July 2008 pp.935 to 948 Manuel, J 2014, 'CRISIS and EMERGENCY RISK COMMUNICATION: Lessons from the Elk River Spill', Environmental Health Perspectives, vol. 122, no. 8, pp. A214-A219. Available from: 10.1289/ehp.122-A214. [17 August 2017]. Marquette University, 2017, What is Risk management? viewed 17 August 2017, https://www.marquette.edu/riskunit/riskmanagement/whatis.shtml Martin, DX 2012, 'Risk and the Future of Quality', Journal for Quality Participation, vol. 35, no. 3, p. 9. Mohtashami, M, Marlowe, T, kirova, V, Deek, FP 2006, 'RISK MANAGEMENT FOR COLLABORATIVE SOFTWARE DEVELOPMENT', Information Systems Management, vol. 23, no. 4, pp. 20-30. Sustain Case, 2017, BP tracks progress in process safety management through leading indicators, to prevent incidents, viewed on 17 August 2017, https://sustaincase.com/case-study-bps-policies-and-measures-for-preventing-and-managing-accidents-and-oil-spills/ Viner, D, 2015, Occupational risk control: predicting and preventing the unwanted, Surrey: Gower.