TODAY INTRODUCTION TO

• Risk, Mitigation & Resilience

• Ethical & Environmental
 • Risk
• “the possibility of incurring misfortune
or loss; hazard”
Collins English Dictionary Complete &
Unabridged 10th Edition(2009).
• “Risk is the potential for unwanted
negative consequences from events.”
RISK, Slack, N., Chambers, S. and Johnston, R., 2009. Operations and
MITIGATION & process management: principles and practice for strategic impact.
Pearson Education.
RESILIENCE • Mitigation (to mitigate)
• Make (something bad) less severe,
serious, or painful.
Oxford Dictionary
• Resilience
is the ability to prevent, withstand and recover
from those events
 Supply failures

Internal failures, human,

organisational, technology

Identify possible sources

STARTING and consequences of
Product and or service
design failures
failure (risk).
POINT
Hence these are RISKS Customer failures

Environmental disruption,
weather, crime, terrorism,
and can cause failures
 FAILURE PREVENTIONS

01 02 03
Avoid Failure! Design out Maintain
Failure assets and
(DFMEA, process.
PFMEA).
 Isolate Failure from its consequences
• Planning for effects of failure.
• Insurance.
• Risk sharing
• Hedging
• Spatial or temporal containment that
MITIGATION prevents the failure spreading
geographically or over time.
• Remove items affect by failure
• Substitution, (production lines,
information routes or support
services)
 What is the accept level of risk
/failure?

Probability that some failure will

occur.

RESOLUTION However what is the resolution of

failure?
OF RISK
Therefore what is the level of
acceptable risk?

Could the improvement tools we

have covered address this risk?
 LIKELIHOOD

Slack, N., Chambers, S. and Johnston, R., 2009. Operations and process management: principles and practice for strategic impact. Pearson Education.
 • Concept of risk is inextricably linked with
time (particularly the future).
• Determining the likelihood of an
occurrence, Determining the cost/benefit
of the outcomes of “what-if scenarios”.
• Using uncertainty and decision analysis,
based on: existing data of past
experiences, expectations and (often)
prejudices.
TIME • As soon as an outcome is reached in a
risk scenario:
o The risk ceases to be an issue.
o However the outcome is either
§ Positive (a benefit) or
§ Negative (a challenge)
§ This then must be assessed and
dealt with
 Preconceptions and Reactions to an
prejudices come into ambitious project can
play when assessing risk vary,

PERCEPTION More cautious looking to

AND Entrepreneurs keen to
exploit opportunities
minimise their exposure
to risk.
ATTITUDE

Individuals’ reactions may

vary depending upon: Balance required to
•The amount at stake, assess risk to potential
•The context of the risk and gains
•Time Scale.
 DEALING WITH RISK (RISK
MANAGEMENT)

Minor
Interactive: problems are
Proactive:
identified and Inactive: No
courses of Reactive: accepted
mitigation action
action risks •Others resolved
and problems
identified to identified and regardless of
contingency cost (e.g. late emerge
prevent risk plans monitored.
occurrence. delivery, unexpectedly.
created. additional
labour costs).
 DIAGRAMMATIC ALLY

Sources of
potential
failure

Slack, N., Chambers, S. and Johnston, R., 2009. Operations and process management: principles and practice for strategic impact. Pearson Education.
 Risk
Identification

RISK Risk
ANALYSIS Assessment
PHASES

Mitigation and
Contingency
Planning
 RISK IDENTIFIC ATION PHASE

• Look for risks relating to:

• The project plan
• Stakeholders
• Resources
• The organisational environment
• The external environment
• The risk profile will change as you move through the project so risk
identification is an ongoing task not a one-off event.
• Typical techniques: Can you suggest any?
• Checklists
• Brainstorming
• Ishikawa diagrams
 RISK ASSESSMENT PHASE

• Which are our most serious risks? Where should we focus

our efforts in risk control?
• To answer … we need to assess the risks.
• Mostly qualitative (even when it appears numerical!)
• … some quantitative analysis can be added.
• Typical techniques:?
• Pareto analysis
• Analysis graphs
• Financial Analysis
 MITIGATION AND
CONTINGENCY PLANNING

• Mitigation and Contingency planning:

• Characterise the root causes of the major risks to be managed.
• Identify alternative mitigation strategies for these
• Assess and prioritise mitigation alternatives.
• Select and commit the resources required for specific risk mitigation choices.
• Communicate plans to all project participants for implementation.
• Typical options:?
• Avoidance
• Mitigation
• Transference
• Deferral
• Acceptance (Contingency)
 • Why ?
• Which are our most serious
risks?
• Where should we focus our
efforts in risk control?
• Most assessment of risk is
qualitative (even when it
RISK, appears numerical!) some
MITIGATION quantitative analysis can be
QUANTIFYING added
• Typical techniques:
• Pareto analysis
• Analysis graphs
• Financial Analysis (e.g. BEP, NPV,
IRR)
• FMEA, FMECA
• Health and Safety Risks
 The Safety Maxims

The basic thoughts behind the observations

above can be formalized in safety maxims, as
follows:

1. All the many hazards in life cannot be

completely avoided, and all risks from such
ACCEPTABLE? hazards can never be completely eliminated.

2. Careful thought and effort can often

reduce the risks in ordinary life down to
acceptable levels.

3. Our limited resources of time and effort

should be utilized for maximum benefits of
risk reduction rather than being dissipated in
hopeless efforts to completely eliminate
certain selected risks.

Kinney, G.F., 1976. Practical risk analysis for safety management. China Lake, CA: Naval Weapons Center.
 ANOTHER APPROACH

“risk assessment involves nothing more than identifying potential threats, estimating their
likelihood (number of events/time interval), and estimating the
consequences (impact/event)”
Arunraj, N.S. and Maiti, J., 2007. Risk-based maintenance—Techniques and applications. Journal of hazardous materials, 142(3), pp.653-661.
 RISK ANALYSIS
METHODOLOGIES

Arunraj, N.S. and Maiti, J., 2007. Risk-based maintenance—Techniques and applications. Journal of hazardous materials, 142(3), pp.653-661.
 Risk Severity: Probability and Impact
Ratings
• Risk severity = (Probability, Impact)
• Probability − the likelihood of the risk
occurring
• Impact − the consequences if the risk
ONE APPROACH does occur
TO ASSESSMENT • Rate both the probability AND impact
on a 5 point
• Likert scale: “v. low, low, medium, high,
v. high”.
• Map your risks to a matrix to view
their relative “riskiness”
MAPPED
RISKS
 Even with the
Then feed back best planning and
through the
system resilience
PDCA cycle. failures will occur.
LESSON
LEARNED

Therefore RCA need and

the associated tools.
1. Number tools available to asses risk.

2. Some components of them may be subjective.

3. Although they help identify and therefore allow for mitigation to be actioned.

IN SUMMARY
 ETHICS

• Expectation is that Organizations operate ethically

• Ethical: “relating to moral principles or the branch of
knowledge dealing with these.”
(https://en.oxforddictionaries.com/definition/ethical)
• Moral: “Concerned with the principles of right and wrong
behaviour.”
(https://en.oxforddictionaries.com/definition/moral)

https://www.google.co.uk/search?q=ethical&rlz=1C1CAFB_en&source=lnms&sa=X&ved=0ahUKEwik6KSgyYjfAhXHDsAKHaxfAYMQ_AUICSgA&biw=1075&bih=702&dpr=1
 ETHIC AL INCREASING

• Potentially due to high profile scandals, (ENRON)

• Improved transparency of activities, whistle-blowers
• Increased Media focus, eg low-cost labour exploitation

Defined
Law Free Choice

Richard Daft (2008) distinguishes between the ‘domain of codified law’ and the ‘domain of
free choice’
 ARE WE FREE TO
CHOOSE?

• Daft (2008, p. 139) ‘standards of

conduct, based on shared principles and
values about moral conduct that guide
an individual or company’.
 THREE LEVEL FRAME WORK

Johnson et al. , (2008) considered

• Level 1, individual ethics, concerns the decisions and actions of

individual managers, and the ethical principles behind their behaviour;

• Level 2, the organization’s ethical stance, concerns the extent to which

the organization’s minimum obligations to stakeholders and to society
at large will be exceeded;

• Level 3, corporate social responsibility, focuses on how the organization

puts its ethical stance into practice, by addressing different stakeholder
interests.
 INDIVIDUAL ETHICAL
FRAMEWORK
Cavanagh et al., 1981; Velasquez et al., 1983 suggest
combining the below to reach a judgement.
 ETHIC AL
DECISION
TREE

• Their work resulted in

a defined decision
tree:
 ORGANISATION ETHIC AL
APPROACH

• Johnson et al. (2008, p. 189) suggest organizations take

increasingly more forceful ethical stances.
 CORPORATE SOCIAL
RESPONSIBILITY (CSR)

• Shift in the social acceptance have lead to changes in business

operations, for example introduction of
• UK Bribery Act 2010
• Modern Slavery Act 2015
• Fair Trade Movement
• Some may strive to further improve beyond legalisation.
• CSR movement also considers, environmental,
• PESTLE Analysis, Political, Economic, Social, Technological, Legal
and Environmental
E.g. https://processpolicy.com/pestle-analysis.htm
 TYPIC AL CSR POLICY

• This might include but not limited to:

Environment Equal opportunities Suppliers

1. Pollution control 1. Minority employment 1. Fair terms of trade
2. Product improvement 2.Advancement of minorities 2. Blacklisting unethical, irresponsible suppliers
3. Repair of environment 3.Advancement of women 3. Subcontractor code
4. Recycling waste materials 4. Support for minority businesses
5. Energy saving 5. Other disadvantaged groups

Community involvement
Personnel 1. Charitable donations
1. Employee health and safety 2. Promoting and supporting public health initiatives
2. Training 3. Support for education and the arts
3. Personal counselling 4. Community involvement projects
4. Subcontractor code of behaviour
5. Providing medical care or insurance

Products
1. Safety
2. Quality
3. Sustainability, percentage of materials that can be recycled

Huczynski, A., Buchanan, D.A. and Huczynski, A.A., 2013. Organizational behaviour. p68 London: Pearson.
 CRITICISMS OF CSR

• Said to be vague
• Dependent upon settings
• Shareholders money used
• By acting legally no moral issue.
• Are they just a PR for companies
• Law and customers can vary between countries
• Ignores competition, and resultant benefits.
• Is not social and environmental issue a government prevue?
 Considerations,
• Possible new suppliers of parts,
components and machines
• Do they have CSR policy
• Do their sub suppliers adhere to this?
• Would the improvement in process
IN CONTEXT affect and CSR policy that may be in
place?
• What is the Risk of this, how to
mitigate
• Is the project team / management style
operated ethically?
• What risk could there be to the team
operation and how could you mitigate.
 Johnson, G., Scholes, K.
and Whittington, R.
Daft, R. (2008)
Management (6th edn), (2008) Exploring
Corporate Strategy:Text
Mason, OH Thomson
South-Western. and Cases (8th edn),
Harlow, Essex: Financial
Times Prentice Hall.

REFERENCES Velasquez, M., Moberg,

D.J. and Cavanagh, G.F.
Cavanagh, G.F., Moberg,
D.J. and Velasquez, M. (1983) ‘Organizational
statesmanship and dirty
(1981) ‘The ethics of
organizational politics’, politics: ethical
guidelines for the
Academy of Management
Review, 6(3), pp. 363–74. organizational politician’,
Organizational Dynamics,
12(2), pp. 65–80.
 • ISO 14001 Environmental
Management.
• You can access BSOL for a range of
standards through your Uni Login at
https://bsol.bsigroup.com/
• Can Support:
1. Environmental Policy
2. Impact Reduction
E N V I RO N M E N TA L 3. Pollution Prevention
4. Legal Compliance
5. Culture Change
6. Corporate Responsibility
7. Reputation
8. Resource Management
 Need to consider,
• Recyclability, of both products, by-
products and assets.
• Ingress into water course
• Air quality, exhaust gases
• Transportation methods
• Project teams communication
methods, face to face, virtual
ENVIRONMENT
• Packing reuse, recycle or returnable.
• Use of recycled material in production
of product. (regrind, recycled cloths,
recycled material in product)
• Sustainable power usage, wind, sola,
possible incorporate into plant.
 Considered quantifying
risk.

Looked at Ethics within

business context.
IN
SUMMARY
Considered CSR aspects

Reviewed Environmental
consideration in the
business context.