Six Systematic Approaches to Risk Management - Essay Example

STEPS OF RISK MANAGEMENT NAME DATE Introduction Risk management is a vital step adopted by business owners to ensure that their workers and businesses are protected. This process involves; identifying, analyzing and taking precautionary steps that will reduce the exposures to any loss that an organization might face (Crouhy et al, 2014). Additionally, business owners ensure that in their risk management strategy, their companies and workers are able to comply with the laws deployed by the governing body in their area. According Williams Jr. and Heins (1997) the purpose of risk management is to allow an individual to focus on the risks that really threaten your work place and work force. The risks may range from minor to major potential risks that are likely to cause real harm such as; spillages that may lead someone to slip and fall leading to injuries or accidental fires that may erupt and cause damages to your workplace or kill the workers (Crouhy et al, 2014). This means that an employer has to put in place effective measures to ensure that the most valuable asset, which is the work force, is protected from harm. Rejda and McNamara (2013) argue that in order to manage the wide variety of risk involved in the work place both internal and external, the process of risk management makes use of other tools and techniques such as insurance. This way an organization is able to manage both predictable and unpredictable risks that a business may encounter. Over the years risk management has expanded and no longer pertain property and casualty alone but also include financial risks. Financial risks management may include; interest rates, foreign exchange rates and any form of risk associated with E-commerce that an organization is likely to face (Hull, 2012). There are six vital steps in the process of risk management (Crouhy et al, 2014). These steps are; 1) Identification of a hazard, 2) Identification of the associated risk, 3) Assessment of the risk 4) Control of the risk 5) Documentation of the process and 6) Monitoring and review of the process. Risk should be assessed and managed based on the best practice within an organization (AS/NZS ISO 31000:2009). This report will discuss in detail each step while outlining the advantages and disadvantages associated with each one of them. By using examples from Australia and New Zealand Strategic and Operational risk management plans relevant to this topic, the report will discuss how these steps can be incorporated in an organization’s day to day activities in order to reduce any form of loss that may be encountered. Further the report will outline five strategic risk management steps that a CEO can implement in running their organization. This will be discussed as part of the recommendations. Six Systematic Approaches to Risk Management Hazard Identification This process involves evaluating each work area and work task in order to identify any form of act or condition that has potential to cause damage, illness or injury. The Centre for Chemical Process Safety (2010) affirms that “Work area may include any of the following; machine workshops, laboratories, office areas, agricultural and horticultural environments, stores and transport, maintenance and grounds among others. Work force task on the other hand can include; using screen based equipment, audio and visual equipment, industrial equipment, hazardous substances and/or dangerous goods, teaching/ dealing with people, driving a vehicle, dealing with emergency situations and construction among other work related activities. After identifying these areas it is important and easy to identify the hazards involved.” Some of the proactive hazard identification methods include; conducting out safety surveys, operational safety audits, and safety monitoring and safety assessments. An example of a hazard may include waste oil from an engine or company machine which is highly flammable and might lead to fire, damage the health of a work through skin absorption or may consequently cause a slip or fall leading to body injuries. However there are several factors to consider during hazard identification depending on the nature and size of an organization. The approach used during hazard identification, ensures that all potential hazards within an organization are identified and evaluated. This way an organization is able to eliminate any risks associated with an identified hazard by providing alternative risk assessment and mitigation plans. Nonetheless, during hazard identification it is quite easy for the management to overlook the simple hazards as they assume that they are part of running the organization (Center for Chemical Process Safety, 2010). Risk identification This second step after identifying the hazards requires an organization to examine any risks that are associated with the health or safety hazard. For example: Hazard: Unguarded gear wheel on a workshop grinding machine Risks: worker’s clothing’s or limbs may be draw in by the machine and crushed Hazard: presence of flammable liquids such as; engine oil, petrol or gasoline gas Risks: May cause fire burning employees and the building structure. In examining the risks associated, it is vital for the organization’s management to outline any contributing factors. During the risk assessment process previous health and safety audit information of the organization should be used to assist in conducting a comprehensive evaluation (Crouhy et al, 2014). A comprehensive evaluation will help in understanding the risk that is associated with the hazard in question. In the above illustrated examples, if an organization is able to identify the hazards and risks associated, it will be able to come up with a strategy that will prevent any losses from occurring due to the hazards. Risk identification enables an organization in determining factors that influence the degree of risks. For example: to what extent an individual is exposed to the hazardous condition and how severe are the effects associated with the conditions of exposure (Quan et al, 2014). Consequently this step allows the organization to have a complete financial plan for the risk management process. Risk Assessment Risk assessment involves a number of processes to analyze and evaluate the risks that are associated with the identified hazards. The risks range from health to safety effects that may cause damage to the organization and its workers. This includes the probability or severity that may arise due to the hazard (Quan et al, 2014). Precautionary strategies are therefore put in place to determine methods for monitoring in order to achieve the best health and safety standards (McNamee, 1998). For example a food chain restaurant is likely to catch fire due to the use of stoves and gas cylinders in the kitchen. Therefore the management team is required to put in place precautionary and preventive measures which will reduce the likely hood of the place catching fire. Risk assessment provides an organization with an opportunity to take up the right precautionary measures in relation to the organization’s activities and number of staff. Risk Control This is also known as risk reduction technique. Risk control is divided into two basic parts that need to be adhered to when containing or minimizing any risks within an organization. These steps include action plans that need to be put in place in order to minimize the risk and implementation of strategies that can be used in minimizing the impact of risks associated (Willians Jr. and Heins, 1997). For instance in reducing falls and injuries within an office work area an organization will ensure that all the floors are dry and the material used in making the floors are less slippery. The purpose of this step is basically to minimize a risk or its impact or if possible eliminate it altogether. Documenting process This process involves the recording keeping process whereby all the identified control measures are outlined in the policy book of an organization and are implemented in the right manner. Consequently the documented processes will contribute in managing any future risks that may be similar to the once already addressed (Rejda and McNamara, 2013). The documented information should include comprehensive data that illustrates that the information on the hazards identified are all included, risk associated is identified and control measures have been put in place. Monitoring and Reviewing Monitoring and reviewing is an integral part of risk management, this is because it involves evaluating impact the hazards identified have on the use of equipments, substance, system or environment (Quan et al, 2014). As is the case in the New Zealand Management plan section 14, AS/NZS 4801 and 4804, auditing and reviewing the risk management plans in an organization is part of the assessment and continuous improvement of an organizations risk management plan. This way an organization is able to identify if the risk management steps undertaken are contributing factors or controlling factors to the risk. This process also allows an organization to inform its staff of any changes that may have occurred which may put them at risk. Workers are informed through education, trainings, instructions and adequate supervision carried out. All this is important in order to make sure that all the staff members are safe from injury and risks whether it be health or safety risks. Supervisors are also advised to carry out area supervision on machines and equipments in order to determine their sustainability and suitability. This process identifies hazard identification, risk management and control as activities in an organization that should be continuous. Therefore the organization’s management is required to carry out a risk management process with its environs any time changes have occurred regardless of the nature of change (Quan et al, 2014). Examples of five Risk Management Recommendations for a Community Health Center The purpose of this risk management plan is to assist the CEO of a community health centre to implement the outlined risk management processes in the organization. The risk management plan is in relation to potential clinical risks, patient and visitor safety as well as potential business, operational and property risks. Risk management plan within a health facility stimulates the growth and development of the facility in the event of identified risks, loss control measures and reduction strategies. Strategic Risk Management steps Risk management These are clinical and administrative activities that the management team takes part in to identify, analyze, prevent and control any risks of injury or damage that may be experienced by persons within the facility as well as the organization (Kavaler and Alexander, 2012). The activities involved in the risk management process include; making decisions that will reduce clinical, organizational and any operational risks. Risk analysis Identifying and determining any form of probable cause of harm due to an identified risk. Risk analysis will allow the CEO and the risk manager to come up with alternative preventive measures for dealing with the risks identified. Some of risk analysis techniques to be implemented can be; root cause analysis, system analysis and tracking and trending of unfavorable damages among others that may be applicable to the facility (Alexander, 2012). Loss Prevention The step requires the risk manager in the health facility to conduct a risk assessment and identification process so as to identify any potential hazards that may lead to loss. This can be done through a proactive method whereby staff and volunteers in the facility are trained and educated in light of the risks identified (Kavaler and Alexander, 2012). Review and revision of preventive measures is also performed in order to monitor the health and safety measures in the facility. Loss control This step involves the risk management strategies that the CEO needs to implement in order to ensure that likelihood of losses, damages and injuries are minimized at all costs. The process of loss control is achieved through claims investigation and administration. This way the community health centre will be able to make an early identification of events and manage them as soon as possible. Therefore minimizing any potential loss of reputation and injuries that may occur to staff members and patients as a result of the event. Claim Management According to Kavaler and Alexander (2012) this is a type of power that a risk manager within the health facility which allows him or her to exert some control over potential or filed claims against the health center. This claim empowers the manager to; identify potential claims, inform the health centre’s liability insurance company, evaluate the risks and financial liabilities associated as well as mitigate potential implementation plan for any damages (Hull, 2012). The risk manager may also assist the insurance company in preparing depositions and investigate adverse events or incidents. Summary It is important that staff members are able to comply with the safety measures that are put in place in the health facility. This will ensure that the facility has made sure that the implementation of patient and staff safety initiatives are part of the risk prevention programs in the health facility. In addition to this the CEO needs to ensure that staff and volunteers take part in trainings and educational programs that discuss the risk management measures outlined in the patient safety and risk management report. Consequently it is important that the CEO sees to it that the report is reviewed at least on an annual basis. For instance as outlined in the AS/NZS 4801:2001 and 4804:1997 health and safety management guidelines for New Zealand risk management guidelines, the need to continuously improve the health and safety management system in an organization is a must in an organization. Conclusion In order to understand the process of risk management process and its relevance in any organization, it is first very important to understand that this process is an ongoing process that changes accordingly depending on the risks identified in a company. The process of risk management needs an organization to identify the risk, assess it, evaluate the risk, report the risk and constantly monitor it. To ensure that the risk management process is effective and adapts to the organizational changes the risk manager has to carry out a review at least annually. Staff members on the other hand require basic education and training that will enable them have a better understanding of the risk management strategy implemented in their organization. Therefore the risk management policies or strategies implemented within an organization are solely dependent of the environment of the organizations and the risks identified in the organization. References AS/NZS ISO 31000: 2009 Risk Mangement- Principle and Guidelines. [Online]. Retrieved From: shop.standards.co.nz/catalog/31000%3A2009(AS%7CNZS+ISO)/view. (Accessed on 13rd May 2015) Center for Chemical Process Safety. (2010). A Practical Approach to Hazard Identification for Operations and Maintenance Workers. Wiley-AIChe Crouhy, M., Galai, D. & Mark, R. (2014). The Essentials of Risk Management. McGraw-Hill Hull, J. C. (2012). Risk Management and Financial Institutions. Wiley Kavaler, F. & Alexander, S. R. (2012). Risk Management in Health Care Institutions: Limiting Liability and Enhancing Care. Jones and Bartlett Learning McNamee, D. (1998). Business Risk Assessment. Institute of Internal Auditors Quan, G., Hong, X. M. & Chun, X. S. (2014). Refining Business HSE risk Identification and Control Task Drive Vocational textbook series. Chemical Industry Press Rejda, G. & McNamara, M. (2013). Principal of Risk Management and Insurance. New jersey: Prentice Hall Williams Jr. A. & Heins M. R. (1997). Risk Management and Insurance. New York: McGraw-Hill/Irwin Read More