RISK ASSESSMENT PROCEDURE

Hazard Who might be harmed?

Is more needed to control the risk?

Look only for hazards, which you could reasonably expect to result in significant harm under the conditions in your workplace. Use the following examples as a guide: • Slipping/tripping hazards, e.g.

poorly maintained floors or stairs;

• Fire, e.g. from flammable materials;

• Chemicals, e.g. battery acid; • Moving parts of machinery, e.g.

blades; • Work at height, e.g. from

mezzanine floors; • Ejection of material, e.g. from

plastic moulding; • Pressure systems, e.g. steam

boilers; • Vehicles, e.g. fork-lift trucks; • Electricity, e.g. poor wiring; • Dust, e.g. from grinding; • Fumes, e.g. from welding; • Manual handling; • noise; • poor lighting; • low temperature.

There is no need to list individuals by name - just think about groups of people doing similar work, or who may be affected, e.g. • office staff; • maintenance personnel; • contractors; • people sharing your

workplace; • operators; • cleaners; • members of the public Pay particular attention to: • staff with disabilities; • visitors including

children; • inexperienced staff; • lone workers. They may be more vulnerable

For the hazards listed, do the precautions already taken: • meet the standards set by a

legal requirement? • comply with a recognised

industry standard? • represent good practice? • reduce risk as far as is

reasonably practicable? Have you provided: • adequate information,

instruction, or training? • Safety codes or procedures? If so, then the risks are adequately controlled, but you need to indicate the precautions that you have in place (refer to safety codes or procedures etc. where applicable). Where the risk is not adequately controlled, indicate what more you need to do as an ‘action’ list.

Review and Revision Set a date for review of the assessment. On review check that the precautions for each hazard still adequately control the risk. If not indicate the action needed. Note the outcome. If necessary complete a new page for your risk assessment. Making changes in your workplace, e.g. when bringing in new: • Machines • Substances

• Procedures

Select the Appropriate Technique for Handling Losses The third step is to select the most

appropriate technique for handling each potential loss. The major methods for handling potential

losses are avoidance, risk control, retention, non insurance transfers, and insurance.

1. Avoidance. Avoidance is one method for handling a potential loss. For example, you can avoid

being mugged in a high-crime rate area by staying out of the area, and you can avoid the loss

from the sale of a home in a depressed real estate market by renting instead of buying.

2. Risk control. Risk control refers to activities that reduce both the frequency and severity of loss.

For example, you can reduce your risk of an auto accident by driving within the speed limits, taking

a safe driving course, and driving defensively. Risk control also aims to reduce the severity of a

loss. For example, wearing a helmet reduces the severity of a head injury in a motorcycle

accident. Wearing a seat belt reduces the severity of an injury in an auto accident. Having a fire

extinguisher on the premises reduces the severity

Personal risks

Loss of earned income to the family because of the premature death of the family head

Insufficient income and financial assets during retirement

Catastrophic, medical bills and the loss of earnings during an extended period of

disability

Loss of earned income from unemployment

Property risks

Direct physical damage to a home and personal property because of fire, lightning, wind-

storm, flood, earthquake, or other causes

Indirect losses resulting from a direct physical damage loss, including extra expenses,

moving to another apartment or home during the period of reconstruction, loss of rents, and

loss of use of the building or property

Theft of valuable personal property, including, money and securities, jewelry and furs,

paintings and fine art, cameras, computer equipment, coin and stamp collections, and

antiques

Direct physical damage losses to cars, motor- cycles, and other vehicles from a collision and

other-than-collision losses

Theft of cars, motorcycles, or other vehicles Liability risks

Legal liability arising out of personal acts that cause bodily injury or property damage to

Others.

Evaluate Potential Losses The second step is to estimate the frequency and severity of potential

losses so that the most appropriate technique can be used to deal with the risk. For example, the

chance that your home will be totally destroyed by a fire, tornado, or hurricane is relatively small, but

the severity of the loss can be catastrophic. Such losses should be insured because of their

catastrophic potential. On the other hand, if loss frequency is high, but loss severity is low, such losses

should not be insured (such as minor scratches and dents to your car). Other techniques such as

retention are more appropriate for handling these types of small losses. For example, minor physical

damage losses to your car can be retained by purchasing collision insurance with a deductible.

Categorised Risk Plans

Risk avoidance

o Move away to safer district

o Adopt non-materialistic philosophy

Risk mitigation (stabilize the assumption)

o Install extra high-security locks

o Install a burglar alarm

o Buy a big, noisy dog

Risk mitigation (de-sensitise impact)

o Store valuable items in a safe, or at bank

o Buy a quiet crocodile

Risk transfer

o Arrange house contents insurance

Risk retention

o Keep stock of glass, timber to repair windows

o Take any burglary ‘on the chin’

PERSONAL RISK MANAGEMENT The principles of corporate risk manager also applicable to a personal risk management. Personal risk

management refers to the fiction of pure risks faced by an individual family, and to the selection of the

most appropriate technique for treating such risks.

Steps in Personal Risk Management

1. Identify potential losses

2. Evaluate potential losses

3. Select the appropriate technique for handling losses, and

4. Implement and review the program periodically.

Avoidance, however, has two major disadvantages. First, the firm may not be able to avoid all losses.

For example, a company may not be able to avoid the premature death of a key executive. Second, it

may not be feasible or practical to avoid the exposure. For example, a paint factory can avoid losses

arising from the production of paint. Without paint production, however, the firm will not be in business.

Loss Prevention Loss prevention refers to measures that reduce the frequency of a particular loss.

For example, measures that reduce truck accidents include driver examinations, zero tolerance for

alcohol or drug abuse, and strict enforcement of safety rules. Measures that reduce lawsuits from

defective products include installation of safety features on hazardous products, placement of warning

labels on dangerous products, and institution of quality- control checks.

Loss Reduction Loss reduction refers to measures that reduce the severity of a loss after it occurs.

Risk management matrix a. Low frequency – low severity - Retention

b. High frequency – low severity - Loss prevention and retention

c. Low frequency – high severity - Insurance

d. High frequency – high severity - Avoidance

Exercise: Risk Management applied to House Burglary Background

You’ve just moved to a new town and you’ve 100 things to sort out

You learn that a number of burglaries have taken place in your new neighbourhood.

Do you lock your self in, and refuse leave your house? – No. You’ve got a life to lead!

The principal working assumption is an implicit assertion ‘We will not get burgled today’.

The assumption wasn’t ‘I might get burgled’ That isn’t an assumption, it’s an infallible truism.

But your working assumption might be wrong!

Failure of that working assumption constitutes the hazard. You’ve identified a risk.

How are you going to manage it?

Example : Risk for a Corporate Risk Control

As noted above, risk control is a generic term to describe techniques for reducing the frequency or

severity of losses. Major risk-control techniques include the following:

Avoidance

Loss prevention

Loss reduction

Avoidance means a certain loss expo- sure is never acquired, or an existing loss exposure is

abandoned. For example, flood losses can be avoided by not building a new plant in a flood plain. A

pharmaceutical firm that markets a drug with dangerous side effects can withdraw the drug from the

market.

The major advantage of avoidance is that the chance of loss is reduced to zero if the loss exposure

is never acquired. In addition, if an existing loss exposure is abandoned, the chance of loss is reduced

or eliminated because the activity or product that could produce a loss has been abandoned.

Post Loss Objectives

1. Survival of the firm

2. The second objective is the reduction of anxiety

3. Stability in earnings

4. Continued Growth

5. Social Responsibility

STEPS IN THE RISK

Identify Potential Losses

Evaluate Potential

Select Appropriate Techniques

1.Risk Control

•Avoidance

•Loss Prevention

•Loss Reduction

2.Risk Financing

•Retention

•Non Insurance Transfer

•Commercial Insurance

Implement & administer the program

Risk Management Process

The identification, analysis and economic control of those risks which can threaten the assets or

earning capacity of an enterprise. The definition is valuable because it highlights the structured

approach, which is called for if risks in business environment are to be managed.

The three-fold nature of risk, management is highlighted in the definition.

1. Risks must be identified before they can be measured, and only after their impact has

been evaluated

2. One decide on the most effective method of control.

3. Cost of control of risk must be commensurate with the 'benefit expected to be derived.

The definition mentions the assets and earning capacity of an organization. These assets can

be physical or human they are both important and risk management must be seen to have a part to

play in both. However, risks do not strike at assets directly and for this reasons the definition also

mentions the earning capacity of an enterprise.

THE NATURE OF RISK MANAGEMENT

Risk management is a scientific approach to the problem of dealing with the pure risks faced by

individuals and business. It is a function of management. The management of an organization has

ultimate responsibility for dealing with all risks facing the organization, including both pure and

speculative risks. Risk management focuses its attention only on the pure risks.

Objectives of Risk Management

Pre Loss Objectives

1. Any firm should prepare for potential loss in the most economical way.

2. Reduction of Anxiety Continuity in operations

3. Meet Legal Obligation