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Risk Analysis and Hazardous Operations Control Card. Risk-Based Approach to Conducting Internal Audit Projects

To reduce the consequences of risks, they must be managed. An example of our company's risk map will help you develop your own risk control algorithm.

The company where I work is part of an international holding, so we assess the risks according to a single regulation for subsidiaries. It involves drawing up a risk panel, on the basis of which a risk map is formed, an example of which I will give below, and a visual diagram.

We have been using this approach for the last three years. With the help of the risk map, we structured the risks, focused on those that pose the greatest danger, and were able to reduce losses. For example, losses on the risk of the procurement market were reduced by 30 percent, on organizational risk - by 60 percent, and tax risk was minimized.

Decide which risks to track

First, decide what risks the company faces and which ones you will track. Absolutely insignificant consideration is not worth it, just spend your time. Choose significant ones that will greatly affect the numbers. We analyze five groups, in each of which we distinguish subgroups.

Financial risks: currency, interest, tax, credit, liquidity risk, investment and derivatives.
Operational risks: technical, informational, organizational, project, legal, management and personnel risk.
Strategic: risk strategy of the enterprise and business area.
Risks environment: legislative, technological, risk of catastrophes and trade relations with the country.
Market: the risk of competition, markets and purchases.

Each subgroup is divided into components. For example, currency and interest rate risk includes the risk of losses caused by fluctuations in Libor / Euribor interest rates on a loan in foreign currency.

Form a panel of significant risks

This indicator allows you to assess the company's losses in the event that a risk arises (taking into account the effectiveness of responding to it). We calculate the risk priority number using the formula:

NPR = ZVR × VVR × MER

where RRR is the risk exposure value (in euros);

VVR - the probability of its occurrence (in%);

MED - risk response efficiency multiplier (in %).

This indicator is affected not only by the size of possible losses, but also by how likely this risk is and how quickly we can eliminate its consequences. The lower the priority number, the less dangerous the risk.

If we sum up the priority numbers of all analyzed risks, we get the total risk of the company. It characterizes the total amount of probable losses or lost profits.

Based on the table, the currency and interest rate risk priority number is EUR 60,000, of which:

50 thousand euros for the risk of currency losses from accounts payable (300 thousand euros × 100% × 16.67%);

10 thousand euros for the risk of losses caused by rising interest rates.

Example of a company risk map

Then we rank the risks according to the priority number and draw up a general diagram. To do this, we put the name, priority number and risk probability from the risk panel into a separate table. In addition, we add the column “share in total risk” to the table (see table 1).

Example

With an annual gross income of the company of 9 million euros, risks exceeding 270 thousand euros will be critical. According to the chart (see additional. Its priority number is 1.1 million euros, which is 33 percent of the total risk. The highest probability of occurrence (94%) is for currency and interest rate risk, although it is insignificant in size - only 2 percent of total risk.

In addition to the diagram, we draw up a risk map in Excel (see Table 2 for an example of a risk map), marking them according to the traffic light principle:

critical risks - in red;
less significant - yellow;
the smallest ones are green.

Figure 2. An example of a risk map

for marking, we create a rule for selecting cells in the “Conditional Formatting” field (see the example of a risk map).

The risk is classified as critical:

if it is inherent in several business processes;
its priority number exceeds three percent of the company's gross revenue;
its implementation affects the achievement of the strategic goals of the enterprise;
to manage it, you need to change the corporate strategy.

Risk example

The risk with a priority number of more than 270 thousand euros is highlighted in red, in the range from 135 thousand (50% × 270 thousand) to 270 thousand euros - yellow, less than 135 thousand euros - green. As can be seen from Table 2, three of the 19 risks are red, two are yellow, and 14 are green.

Calculate the final risk index

The final risk index is determined by the formula

IR = SR: MD

where SR is the total risk,

MD - marginal income.

Risk example

With an annual margin of the company of 2.5 million euros and an aggregate risk of 3,363,333 euros, the risk index will be 1.3.

less than 4 - highlight in green,
in the range from 4 to 6 - yellow,
more than 6 - red.

At the same time, we take into account the difference between the current and past index values:

if it is positive, highlight in red;
equal to zero - yellow;
negative - green.

Red or yellow color serves as a signal to analyze the reasons for the change in the index.

Work plan

number and prioritize each risk for the period compared with the data of the previous year. We analyze the reasons for significant deviations. We study not only increased risks, but also those that have significantly decreased. In the risk panel, we present the causes and measures that will prevent or minimize them.

Risk Example

Risk of loss due to violation production process due to the fact that the potential volume of orders exceeds the capacity of the equipment. And the risk of losses from fluctuations in the Libor/Euribor rate arose because the company attracted a loan in foreign currency. This risk can be avoided by changing the investment policy so as to reduce the need for borrowed funds. If there is a loan, measures are taken to minimize the risk - monitoring rates, reducing debt in case of their growth, etc.

The Controlling Department with subdivisions annually monitor risks, and the most critical of them - quarterly. The results of the risk assessment and the plan for dealing with them are presented to the Board of Directors at the end of the year.

Prepared based on the materials of the journal

Attached files

Risk map example.xlsx

transcript

1 Methodology for constructing a risk map for a project to deploy a technopark in a region that claims to be included in state program"Creation in Russian Federation technology parks in the field high technology» General approach to building a risk map A risk map is a schematic representation of the classification of risks according to their degree of materiality and probability. Materiality and likelihood are the main categories of risk assessment. Materiality is a characteristic of the degree of possible damage from a risk event (direct financial losses, missed opportunities (indirect financial losses), failure to achieve goals and objectives, etc.). Materiality for commercial entities can be measured in monetary terms as an assessment of possible losses from a risk event (for example, a stop of a production line, underfulfillment of the output plan and sales plan, damage in the form of lost profits (lost opportunity)). However, if we are talking not only about meeting the project's commercial efficiency indicators, but also about achieving a social, macroeconomic and political effect, then monetary equivalent as the sole measure of risk materiality is not applicable. In this case, resort to an expert assessment of materiality, which allows you to assess the degree of influence of each type of risk on the possibility of achieving commercial, macroeconomic, social and political objectives during the project. The probability of risk determines the probability of occurrence of a risk event that causes damage. Probability can be estimated using statistical models, fuzzy logic methods, expert methods. For the convenience of applying the methodology by various participants in the process of creating a technopark, it is preferable to use expert methods for determining the risk probability. 238

2 The risk map, in most cases, and, in particular, in this methodology, is presented in the form of a scatter plot, the axes of which are the intervals of materiality and probability values, conventionally defined as low, medium and high degrees(Rice). The diagram forms 9 areas into which the points fall, having the coordinates of the expert assessment of materiality and probability. The division of these areas is aimed at differentiating the approach to risks that have different levels of materiality and likelihood. The highest level of materiality and probability are the risks that fall into area A3. With regard to this category of risks, it is necessary to develop a risk management plan separately, including: 1. Measures to monitor the level of values of risk-determining factors (tariffs, personnel, energy supply, etc.) 2. Decisions to reduce the likelihood of risk events and a plan for their implementation 3 Decisions to mitigate the consequences of risky events (decrease in materiality) and a plan for their implementation Measures to monitor the level of values of risk-determining factors provide for the determination of control points (objects, processes, actions), control methods (reporting, automated monitoring, periodic audit, etc.). e.) depending on the types of controlled risks, as well as indicators and indicators that are used to control and assess risk levels. Solutions to reduce the likelihood of risk events lie in the field of improving business processes, processes for working with labor resources, resources of fixed assets, material resources, as well as in the field of improving control methods. 239

3 Decisions to mitigate the consequences of risk events lie in the field of external placement of risk and internal reservation of financial resources to eliminate the consequences of risk events. The most common solutions are: liability insurance; redistribution of responsibility; reservation of monetary amounts in the budget for the prompt elimination of the consequences of risky events; development and application of instructions for risk control and prompt elimination of the consequences of risk events. The probability of a risk event is high A1 A2 A3 Risk 1 Risk 2 medium A4 A5 A6 Risk 3 A7 low A8 A9 low medium high Significance of the risk event level, reduce the likelihood and eliminate possible consequences. 240

4 Areas A2, A5 and A6 are not as critical as area A3, but also require increased attention, since risk assessments from these areas may move to area A3. According to the risks falling into these areas, it is necessary to cite brief description actions to manage their likelihood and materiality and present in the form of a table in the technology park deployment concept (Table 39). Table 39. List of risk mitigation measures p/n Types of risks B i C i Risk mitigation measures A9 are not subject to analysis and management, as they are either unlikely or have little impact. Based on these risks, factors should be identified and measures to control them should be proposed. To build a risk map, it is necessary to give an expert assessment of the levels of relative probability and relative significance of risks. With such an assessment, it is possible to rank all types of risks characteristic of the proposed project and identify the most significant and probable of them relative to the rest. To assess the absolute risk level of the project (as one of the criteria), for each type of risk, according to certain conditions, an expert value will be affixed, which will determine the absolute risk level and will be included in the integral assessment for the selection of the region and the proposed project for the deployment of the technopark. 241

5 Methodology for constructing a risk map The methodology for constructing a risk map involves several steps: Step 1. Calculation of the relative levels of probability and materiality of risks. Step 2. Determining the intervals for building a risk map and the formation of fields A1-A9. Step 3. Drawing points on the risk map, the coordinates of which are formed by the values of the relative levels of probability and significance of risks. Step 1. Calculation of relative levels of probability and materiality of risks. To rank the types of risks according to their relative probability and materiality, this methodology uses the method of paired comparisons. When using this method, experts carry out paired comparisons of the estimated factors. Such a comparison, as is well known, is the simplest form of reflecting one's preferences, minimizing the difficulties of experts. At the same time, the redundant information contained in the matrix of paired comparisons of factors (estimates of the results of a direct comparison of characteristics by experts and estimates obtained indirectly through comparisons of characteristics with other, intermediate characteristics) allows, in the course of subsequent processing (at the stage of data processing), to significantly reduce the impact of errors made by experts when performing elementary operations of pairwise comparison of factors. A group of experts, using a special verbal-numerical scale, fills in the matrix of paired comparisons 242

6 11 21 m m m 2m... Z =, = 1, n,... mm , if j % y and k % y actually have the same? importance! = # 0.5 if j % ûé in fact! less important k % go facto ;! " 1.5, if j % fact! important k % facto! a ; ; When filling in the matrix, the requirement of complementation of estimates is imposed and taken into account: 1 jk =. (4.13.1) kj first rank the types of risks according to their probability, and then the significance.In practice, for risk assessment, the pairwise comparison matrix is as follows (Example for calculating the relative probability In i of the risk sample): 243

7 jk k V V V V V V V V Σ j 1 V.5 1.5 1 1.5 1.5 1 1.5 9.5 2 V.5 6.5 3 V.5 7.5 4 V B.5 1.5 0.5 6 B.5 7 B B.5 0.5 0.5 Exactly the same matrix is built to assess the significance of risks (C i). j and k in relation to this methodology are designations of probability (В i) and materiality (С i) of types of risk from table 38. The total amount determines the number of points scored by each specific type risk relative to other types of risks in the sample. The sample is formed from all types of risks defined in the register for the Technopark Deployment Concept. Step 2. Determining the intervals for building a risk map and the formation of fields A1-A9. The intervals for building a risk map are determined by the following algorithm: 1. Calculate the minimum and maximum values on the risk map 2. Find the length of the interval 244

8 3. The values of the boundaries of the intervals are determined. The calculation of the minimum value of the risk map is made according to the formula: = 0.5 * (k 1), () min! k=j That is, in the above example k=j=8, respectively min = 0.5*(8! 1) = 3.5 Calculation of the maximum value of the risk map is made by the formula: = 1.5*(k 1) , () max! k=j That is, in the example above, k=j=8, respectively, max = 1.5*(8! 1) = 10.5 The length of the interval is based on the assumption of its linearity and the number of intervals equal to 3. calculated by the formula: int = max! 3 min That is, in the example above: 10.5 "3.5 = 3 int! 2.33 () The error associated with rounding to the second decimal place in such calculations is insignificant. The values of the interval boundaries are determined by the formulas: 245

9 + int = 1 min int ; () + int 2 = 1 int ; () For our example, the values of the interval boundaries will be equal to: = 3.50 min int = 3.50 + 2.33 = 5.83 1 int = 5.83 + 2.33 = 2 8.16 max = 10.50 Since k=j=i, then equal intervals are plotted along the abscissa and ordinate axes. As a result, a diagram is constructed on which areas of risk classification are highlighted: 10.50 10.49 Probability of a risk event high A1 A2 A3 8.16 medium 5.83 low A4 A5 A6 A7 A8 A9 3.5 3.5 low 5.83 medium 8.16 high 10.49 10.50 Risk event materiality 246

10 Step 3. Drawing points on the risk map, the coordinates of which are formed by the values of the relative levels of probability and significance of risks. This step involves a pairwise assessment of all risks included in the sample, first by probability (B i), and then by materiality (С i). Probability values are plotted along the ordinate axis, materiality values along the abscissa axis. As a result, we get a map on which the location of each type of risk is determined. An example of pairwise comparison of probabilities and materialities of a limited sample of risks (from Table 38) is given in Appendix 4.4. It should be emphasized that the risk map gives an idea of the relative level of probability and significance various kinds risk, i.e. compares all risks with each other. Therefore, the risk map in without fail should be supplemented by an assessment of the level of risks of the project, calculated in accordance with the methodology given in Chapter 3 of these Guidelines. As part of the description of risk management methods and techniques, draft provisions of the units responsible for monitoring risks, developing corrective actions, eliminating the consequences of risk events, as well as short description procedures for checking risk factors Section 14. Plan - schedule for the creation and launch of the technology park

11 Table 40. Construction schedule Date of commissioning of the object p / p Main objects Name of the object Belonging of the object to the start-up complex (stage) Date of construction start I quarter of II quarter III quarter IV quarter I quarter II quarter III quarter IV quarter 1. Facility 1 2. Facility 2 Engineering infrastructure facilities 1. Facility 1 2. Facility 2 248

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Risk map.

Risk map - a simple method of risk assessment

Representatives of various sectors of the economy often ask, as risk management consultants, the question: are there simple and visual methods available to non-specialists that would help at least roughly assess the risks in the development of new strategic lines of business, large investment plans, etc.

What is a risk map and why is it useful?

A particular example of a risk map

Description of the risk map structure

The Arabic numerals on the map represent risks that have been classified by…

Building a risk map

Produced as as part of the implementation of the risk management system at the level the whole organization which is difficult and often impossible to internal forces organizations.

To solve a separate range of risk management tasks, for example, as part of a preliminary assessment of various development strategies.

What you can do yourself: the process of building a risk map.

In general, the risk mapping process allows you to:

o Highlight risks

o prioritize risks

o quantify (break into classes) the risks of the organization.

Methods that consultants use when developing a risk map include

about the interview

o formalized and non-formalized questionnaires

o industry surveys and research

o analysis of the company's documentation package

o Numerical evaluation methods

Key Steps in the Self-Hazard Mapping Process

2. definition of the boundaries of the analysis 3. formation of the team 4. analysis of scenarios and ranking

Table of results of scenario analysis and risk ranking

Risk management methods.

By themselves, risk management methods are quite diverse. This is due to the ambiguity of the concept of risk and the presence of a large number of their criteria ... Firstly, risk management approaches can be grouped as methods ... Pre-event risk management methods - measures taken in advance to change ...

To reduce internal business risks, an enterprise should check potential partners on business and carefully select personnel.

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Risk map - a graphical and textual description of a limited number of risks of the organization, located in a rectangular table, along one "axis" of which the strength of the impact or significance of the risk is indicated, and on the other, the probability or frequency of its occurrence. Figure 1 shows a particular example of a risk map.

In fact, depending on the goals of construction, you can build many different types risk maps or variations of this risk map. We will continue to rely on the example shown in the figure. This risk map shows probability or frequency on the vertical axis and impact strength or significance on the horizontal axis. In this case, the probability of occurrence of risk increases from bottom to top as you move along the vertical axis, and the impact of risk increases from left to right on the horizontal axis.

The Arabic numerals on the map represent risks that have been classified into four categories of significance and six categories of probability, so that each probability/significance combination is assigned one type of risk. This classification, placing each risk in a specific box, is not mandatory, but simplifies the process of prioritization by showing the position of each risk relative to others (increases resolution). this method). The thick broken line is the critical limit of risk tolerance. When critical risks are identified, scenarios (a causal relationship of processes, events, and operating risk factors) leading to risks above this limit are considered intolerable. When developing a strategy, for example, for identified intolerable risks, before adopting this strategy, it is required to understand how to reduce or transfer such risks, while risks below the boundary are manageable in an operational manner.

We describe here the risk mapping procedures for an organization that it can perform on its own. Generally speaking, risk mapping methodologies are as different as the risks of companies. Despite the apparent simplicity of the risk map, behind its construction lie not only complicated procedures quantification(for example, for aggregating the views of the company's top management about its inherent risks and placing them on the map), which can be formalized, but also an informal logically rather complex process.

The construction of a risk map can be carried out as part of the implementation of a risk management system at the level of the entire organization, which is difficult, and often impossible, to be carried out by the internal forces of the organization. Or to solve a separate range of risk management tasks, for example, as part of a preliminary assessment of various development strategies. Depending on the tasks and the applied methodology, the organization receives various advantages and benefits. The methodology, which we will discuss in more detail in this paper, is based on reaching an agreed opinion of the top management of the company about the risks. In doing so, the most important benefit is a drastic reduction in cycles and decision-making time.

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