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Risk Management

 

Introduction to Risk Management

Risk management involves identifying potential risks and hazards in order to avoid the negative consequences

Risk management is an extremely broad term, which is not confined to the subject of health and safety training, and is concerned with the identification and prevention of potential risks and hazards.


Risk Management in Health and Safety

In the context of health and safety, risk management involves identifying potential risks and hazards, in order to avoid the negative consequences that could come if the potential outcome of the risk became a reality. Whilst avoidance is preferable, a good risk management plan will also determine the appropriate steps to take should the worst happen, in order to minimise the fallout and impact. A risk management plan will therefore go hand in hand with a risk assessment.

Prioritisation is a key aspect of risk management. Because of the enormous number of potential risks that could befall an organisation, sorting the risks is a necessity, as it is impossible to allocate enough resources to cover all potential risks equally. They can be sorted in a number of different ways, such as:

  • By Probability: This is simply a case of identifying and sorting potential risks by the probably of it occurring.

  • By Severity: Perhaps the most popular way of sorting risks, prioritising by potential impact allows you to focus on the problems which would cause the most damage if they occurred. Whilst they may be less likely to happen, their impact would be far greater, so it is arguable that a greater amount of planning and prevention should be undertaken for these risks.

  • By Time to Remedy: Different problems will take different amounts of time to remedy, impacting the operations of an organisation to function at full capacity. Lost time is lost revenue, particularly in manufacturing companies, so long periods of downtime need to be avoided.


  • Composite Risk Index

    A simple formula to quickly prioritise risks, known as the composite risk index, is:

    Impact of risk event x probability of the risk occurring

    A scale of numbers is used (e.g. 1-5 or 1-10) with 1 being extremely low and a final value being obtained. These values for different risks can then be compared and put in order.

    Whilst this is a simple formula, the values used are highly subjective and extremely difficult to predict/forecast accurately. Past occurrences are also not necessarily a reliable source of predicting future occurrences, particularly if new control measures or working practices have been introduced since the last time it happened.


    Risk Sharing

    One way of lessening the impact of risks is to share the burden and potential consequences. The most popular way is through insurance, where the costs of disaster are covered should the worst happen. Another way is through outsourcing to external companies. Diversifying into other products and markets also shares and lessens risk, as the company is not dependent on just one single market.


    Review Risk Management Plans Regularly

    Businesses are constantly evolving and changing, and so are the risks that they face. A risk management plan that may have been suitable a couple of years ago may not be suitable now. This is due to many factors, such as changing economic conditions, new working practices, new equipment, a change of personnel etc. It is therefore imperative that risk management assessments, plans and procedures are constantly reviewed and refined at regular intervals. The more up to date and relevant they are, the more useful they will be.

    Using a combination of existing management and external health and safety consultants is often the best way to put together a risk management plan. Existing managers and employees will have the intimate knowledge of their organisation needed to make the plan as specific and tailored as necessary, whereas an external health and safety consultant will have the experience and also be able to see things which the management have failed to see by being so close to the business. Sometimes it may be the case that management gloss over particular aspects, whether deliberately or subconsciously, such as having to admit that a piece of equipment that cost a substantial amount of money, or a controversial new working practice, is actually detrimental and causing more risk, and needs to be changed or even scrapped completely. This is where an impartial external influence will be useful.


    Conclusion

    All the identification, planning and prevention in the world cannot prevent all risks. Unexpected events are a fact of life and part of the world in which we live. The ultimate aim of risk management is to lessen both the probability of the risk occurring, along with its impact and the potential damage it can cause should the event happen. Whilst not being able to predict and prevent everything, effective risk management will give an organisation and its employees a greater chance of both surviving and prospering in whatever it does.

     


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