Business Risk Assessment.pdf

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Business Risk Consulting Practice
Assessing Risk. Providing Solutions.
Business Risk Assessment
Do you have all the tools and resources necessary to identify
and prioritize the risks of your organization?
What is
Business Risk?
It is uncertainty that
an organization must
understand and
effectively manage as
it develops and executes
strategies to achieve
business objectives
and create value.
What are the objectives of Business Risk Assessment?
The objectives of Business Risk Assessment are to:
Develop a structured approach to identify, assess, and prioritize key risks
Develop strategies and solutions to key risks
Assign ownership of the key risks
Create the foundation for a common business risk language
Enhance risk management awareness and associate the risks
with the organization’s goals and objectives
Determine whether current risk management activities are effective and
compatible with the organization’s business goals and objectives
What are the benefits?
Several benefits are derived from Business Risk Assessment:
Thorough identification of business risks
Effective prioritization of key risk issues
An action plan to implement strategies and solutions to key risks
Governance tool that prompts management on Marsh Business
Risk Inventory
Assessment of current risk management effectiveness
Strengthened decision making through a structured and
collaborative setting
Increased awareness of risk management in the organization
Business Risk Assessment Process
Outputs
Step I – Understand Needs and Objectives
Confirm
objectives and
develop work plan
Analyze needs and
review internal
documentation
Develop
understanding
of current risk
management practices
Work plan
Preliminary analysis of
current state of risks
Step II – Review and Assess Risk Environment
Interview and gather
feedback from key
stakeholders
Adapt and finalize
the organization’s
risk inventory
Determine key risks
using Risk Advisor
and web survey
software
Pre-read package
Customized business risk
inventory
Context around key risks
Step III – Conduct Facilitated Risk Assessment
Assess the impact
of key risks on goals
and objectives
Prioritize key risks
and assess
management
effectiveness
Assign ownership
for the key risks
Prioritized risk ranking
Impact of risks on goals
and objectives
Gap analysis: risk versus
management effectiveness
Step IV – Develop Summary of Results and Action Plan
Summarize results of
Risk Advisor and
voting workshops
Create risk profile
Determine strategies
and solutions to key
risks with MMC risk
practitioners
Summary of results and
presentation
-
-
-
-
-
Common risk language
Risk Prioritization Map
Gap analysis
Workshop outputs
Action plan
Process Tools and Outputs
Step I – Understand Needs
and Objectives
Confirm objectives, develop project
approach, establish priorities, and assign
responsibilities. Identify project timeline,
key personnel to be interviewed, and
workshop participants.
Analyze current environment of business
and risk management activities,
organization structure, strategies, and
related significant risks.
Step II – Review and Assess
Risk Environment
Interview key stakeholders of the
organization to customize the Marsh
Business Risk Inventory and establish
a common language around risk.
Management are then prompted on
the impact of risks in the Business
Risk Inventory in a facilitated
workshop utilizing Risk Advisor,
Marsh’s risk mapping software.
Gamma Company Work Plan
Description of Tasks
Plan and organize activities. Review documentation
Develop and deliver web survey
Conduct stakeholder interviews
Analyze results and customize business risk inventory
Establish key risks – conduct facilitated Risk Advisor workshops
Prioritize key risks – conduct facilitated voting workshop
Coordinate and develop risk solutions with MMC risk practitioners
Deliver summary of results and updated risk profile
Week 1
Week 2
Week 3
Week 4
Week 5
Week 6
Marsh Business Risk Inventory
EXTERNAL RISKS
EXTERNAL RISKS
•
•
Competitor
Competitor
•
•
Natural Hazard/Catastrophe
Natural Hazard/Catastrophe
•
•
Customer Needs
Customer Needs
•
•
Financial Markets
Financial Markets
•
•
Capital Availability
Capital Availability
•
•
Regulatory
Regulatory
•
•
Industry
Industry
•
•
Terrorism
Terrorism
•
•
Legal
Legal
•
•
Technological Innovation
Technological Innovation
•
•
Shareholder Relations
Shareholder Relations
•
•
Economy
Economy
•
•
Sovereign/Political
Sovereign/Political
INTERNAL RISKS
INTERNAL RISKS
Strategic
Strategic
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Marketplace
Marketplace
Business Model
Business Model
Business Portfolio
Business Portfolio
Organization
Structure
Resource Allocation
Resource Allocation
Planning
Planning
Product Life Cycle
Product Life Cycle
Trademark
Trademark
Brand Erosion/
Brand Erosion/Image
Image
•
•
•
•
•
•
•
•
Customer Satisfaction
Health & Safety
Product/Service Pricing
Knowledge
Management
• Product Development
• Efficiency
Management
Information
Budgeting & Forecasting
Regulatory Reporting
Accounting Information
Investment Evaluation
Taxation
Financial Reporting
Pension Fund
Completeness/Accuracy
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Operational
Operational
Process
Capacity
Performance Gap
Cycle Time
Sourcing
Relationship
Management
• Supply Chain
• Partnering
Human Capital
Leadership
Outsourcing
Hiring/Retention
Performance Incentives
Communications
Training/Development
Competencies/Skills
Accountability
Change Readiness
Empowerment
Succession Planning
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Business Interruption
Product/Service Failure
Environment
Contract Commitment
Measurement
Alignment
Delivery Channels
Integrity
Management Fraud
Employee Fraud
Third-Party Fraud
Illegal Acts
Unauthorized Acts
Reputation
Ethical Decision
Making
• Conflict of Interest
•
•
•
•
•
•
•
•
Physical Security
Product Liability
Compliance
Change Response
Transaction
Processing
• Strategy
Implementation
Technology
Relevance
Data Integrity
Access
Availability
Infrastructure
Capacity
Reliability
E-Commerce
•
•
•
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•
•
Financial
Financial
Interest Rate
Interest Rate
Currency
Currency
Equity
Equity
Commodities
Commodities
Financial Instruments
Financial Instruments
Cash Flow
Cash Flow
Opportunity Cost
Opportunity Cost
Concentration
Concentration
Default
Default
Counterparty
Counterparty
Collateral
Collateral
Credit
Credit
Debt Rating
Debt Rating
Liquidity
Liquidity
Foreign Exchange
Foreign Exchange
Modeling
Modeling
INDUSTRY-SPECIFIC RISKS
INDUSTRY-SPECIFIC RISKS
Developed in conjunction with MMC industry specialists and the client.
Developed in conjunction with MMC industry specialists and the client.
Gap Analysis
9.0
High
Effectiveness
8.0
Management
Effectiveness
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
High
Inherent Risk
Step III – Conduct Facilitated
Risk Assessment
Prioritize the key risks developed in
the Risk Advisor workshop using
real-time voting technology. Relate
these risks to management’s effective-
ness in creating a gap analysis and
Risk Prioritization Map. Assign
ownership for the key risks.
7.0
6.0
5.0
4.0
3.0
Low
Effectiveness
1.0
e
l
l
ge ion tion erce imit ance cing urity
ng pita rces nta ume iance ation tical
r
e
l
ha
i
ma cat up
n
l
u
/L
v
a
ec
t C ge C Reso onm e/Vo omp Inno Pol ion/I Allo terr omm ority over tsou al S
e
r
C
Ou ysic
ark led an Envi Pric
y:
ros urce ss In e-C uth ip/G
E
M
e
A rsh
Ph
log
ity
l - Know Hum
nd eso usin
e
no
od
cia
B
ad
Bra ity/R
ch
an
mm
Le
Te
tiv
Co
Fin
nsi
Se
2.0
Low
Inherent Risk
Step IV – Develop Summary of
Results and Action Plan
Prepare a final report defining key
risks in a common language and an
action plan to manage these risks.
Additional Outputs:
Web survey results
Composite of stakeholders’
interviews
Risk Advisor workshop outputs
Voting workshop outputs
Table of Contents
Business Risk Assessment
Gamma Company, Inc.
Executive Summary ............................................................3
Process Overview................................................................4
Project Scope and Objectives .....................................4
Review of Internal Documentation..............................4
Gamma Company, Inc. Goals & Objectives ..............5
Prioritized Risks Defined .............................................5
Risk Profile ....................................................................6
Results and Action Plan...............................................7
Key Risks to Gamma Company, Inc. ...............................10
Financial: Market Change...........................................10
Knowledge Capital ......................................................11
Hiring/Retention ..........................................................12
Environmental .............................................................13
Commodity Price/Volume ...........................................14
Compliance..................................................................15
Technology: Innovation ..............................................16
Political ........................................................................17
Brand Erosion/Image ..................................................18
Sensitivity/Resource Allocation ................................19
Business Interruption .................................................20
e-Commerce ................................................................21
Authority/Limit.............................................................22
Leadership/Governance .............................................23
Outsourcing .................................................................24
Physical Security .......................................................25
Appendices ........................................................................26
Work Plan.....................................................................27
Web Survey Results....................................................30
Executive/Stakeholder Interviews Risk Matrix ........40
Risk Advisor Workshop Results................................42
Division A Top 10 Risk Map ...................................43
Division B Top 10 Risk Map ...................................44
Division C Top 10 Risk Map...................................45
Aggregated Corporate Top 20 Risk Map ...............46
Voting Workshop Results ..........................................47
Adapted Risk Definitions ...........................................55
For more information, please contact:
National Practice Leader
Alex P. Wittenberg
416 868 8833
alex.p.wittenberg@marsh.com
Toronto
Trevor L. Mapplebeck
416 868 2604
trevor.l.mapplebeck@marsh.com
Joanne Lam
416 868 8848
joanne.lam@marsh.com
Business Risk Consulting Practice
Montreal
Michael Russell
514 285 5839
michael.russell@marsh.com
Calgary
Richard Cutfield
403 294 5224
richard.cutfield@marsh.com
Vancouver
Michael Baddeley
604 692 4840
michael.baddeley@marsh.com
You can also contact your local Marsh office.
www.marsh.ca
www.marsh.com
© Copyright 2003
Marsh Canada Limited.
All rights reserved.
Marsh - The world’s #1 risk specialist
SM
00050163-BRC : 2004/05/10

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