Risk Management

Seminar & Workshop Risk Management

KMI Banten, 16 – 17 February 2007

Izhar
KNRCI Chairman
Director Bayer MaterialScience Indonesia
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 Hazards
“Events or physical conditions that have the
potential to cause fatalities, injuries, property
damage, infrastructure damage, agricultural
loss, damage to the environment, interruption of
business, or other types of harm or loss. [i]”

Defining hazards this way connotes all hazards and does not
necessarily emphasize just natural, technological or human induced
(intentional/terrorist) events.

[i] FEMA. Multi Hazard Identification and Assessment. Washington, DC. 1997.

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 Risk
Risk is the product of probability
(likelihood) and consequences of an event.
[ii]:

This definition implies that risk can be controlled by

managing probability (through mitigation and
preparedness) and consequences (through mitigation,
preparedness, response and recovery).

[ii]Ansell, J. and F. Wharton. 1992. Risk: Analysis, Assessment, and

Management. John Wiley & Sons. Chichester. p100.

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 Risk: What is risk?
„ The chance that something you don’t want
to happen will
„ Or the likelihood that something you would
like to happen doesn’t because you didn’t
take the chance
„ Three main risk categories
• Common to all entities
• Strategy driven for a particular entity
• Industry specific

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 Dealing with Risk

“What is required is that everyday citizens

develop both the maturity and the
willingness to invest in reasonable
measures to mitigate that risk.”

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 Dealing with Risk
“Risk management is fundamental to managing
the threat, while retaining our quality of life and
living in freedom. Risk management can guide
our decision-making as we examine how we can
best organize to prevent, protect against, respond
and recover from an attack.”

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 Four Choices Available
(Risk Treatment)
„ Transfer risk to another party
„ Design and apply appropriate internal
controls/Reduction
„ Avoid engaging in the activity/Elimination
„ Accept risk/Retention

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 Risk Control

„ Understanding Risk
„ Management System to
ensure the barriers against
incidents remain intact
„ Analyze Weaknesses

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 Risk Management

Widely recognized as a strategic function

Becoming an umbrella under which crisis

management and business continuity falls

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What is Risk Management?
Risk management is about :
1. Identifying and assessing key risks

2. Designing and implementing

processes/systems by which those

risks can be managed
3. Maintaining residual risks at a level

acceptable to the Board

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 Identification tools
„ Checklist „ Stressor Analysis
„ Past Data „ Analysis of Past
„ Audits Failure
„ HAZOPS „ Event Trees
„ FMEA (Failure Mode „ Fault Trees
and Effect Analysis)
„ Human Error
„ Critical Incident Analysis
Analysis

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Risk Assessment Elements

R = f (C, F)

R = Risk
C = Consequently
F = Frequency

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 HAZARD SEVERITY CLASSIFICATION

DESCRIPTION CATEGORY MISHAP DEFINITION

Catastrophic I Death or System Loss

Critical II Severe Injury, severe occ.

illness or major system
damage
Marginal III Minor injury, minor occ.
Illness or minor system
damage
Negligible IV Less than minor
injury,occ.illness or system
damage

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 HAZARD PROBABILITY
CLASSIFICATION
DESCRIPTION LEVEL SPECIFIC INDIVIDUAL
ITEM
PREQUENT A Likely to occur frequent

PROBABLE B Will occur several times

OCCASIONAL C Likely to occur sometime

REMOTE D Unlikely but possible to

occur
IMPROBABLE E So unlikely

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MATRIX LEVEL
PROBABILITY
A B C D E

S I 1 1 2 2 2
E
V II 1 2 3 3 3
E
R
I
III 2 2 3 4 4
T
Y IV 3 3 4 4 5

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