Traditionally, December is a month of holidays, but also the hustle and increased risks of all kinds. Even a homely atmosphere at the Christmas tree can be turned into hell when the kids finally manage to hide the candle under the tree. Equally happy New Year celebrations can hide a lot of risks from sandwich or champagne suffocation to burns.
The risks are everywhere - at work, at school, at home, on your travels - and each of us manages his environmental risks, often without realizing it. Some can handle them better, someone worse. Even everyday walking on the sidewalk, or driving on the road is a certain level of risk of injury or death, which we consciously or unconsciously accept, or we try all kinds of ways to manage it.
For companies and organizations the ability to manage risks is fundamental prerequisite for their survival. And it does not matter whether they are operating risks, technical risks, technological, or various financial risks, market or business risks. Businesses and organizations use various ways to reduce, or eliminate risks, to transfer them to other bodies or spread their impacts over time (for example, through insurance).
History shows many different good and a cautionary examples of how to manage risks well or badly.
APOLLO manned space program belongs to those good examples of risk management. It was one of the most comprehensive programs of humanity with the goal of landing humans on the Moon and return to Earth. The Apollo program in addition to its primary target, had a wide range of benefits in the areas of technology, medicine and biology, but also in the organization and coordination of the program, its component activities and projects. In the course was necessary to manage a variety of different types of risks. One of the practical results is the analytical technique FMEA (Failure Mode and Effect Analysis), which is used to identify potential sites of defects or failures. FMEA has found application in the automotive industry and is now a regular part of risk management systems in a wide range of businesses.
As a bad example we can mention a steamship Titanic, in its time the largest ship in the history of mankind, which provided unprecedented comfort, but also the confidence that it is unsinkable. Its tragic story is so well known that it is not necessary to describe it in detail. Luxuriously equipped steamship Titanic of the White Star Line was carrying 2,228 passengers from Southampton, UK to New York. It shipwrecked during its maiden voyage after a side collision with an iceberg. Extensive investigations have brought series of partial errors and undervalued risks by the captain, crew or designers, which resulted in a huge tragedy. Titanic received during its voyage several warnings about the position of the icebergs, but wireless operators did not manage to receive these messages (as dealt with passengers messages). It sailed through the risk area at a high speed, patrol did not have a telescope for observing the situation in front of the ship, twenty lifeboats could accommodate only half of passengers, the construction had low watertight bulkheads, rivets used to cloak the ship were made of poor quality steel and thus the side damage from the iceberg was fatal. It’s a whole chain of undervalued risks that merged into one huge tragedy.
Mistakes and successes of these and millions of other cases are reflected in modern procedures, standards and best practices and helping companies to eliminate many risks, however, it is still applied the old truth that the most common cause of error is human.
An analysis is essential for risk management. Using risk analysis the degree of danger (threat) is determined, which the organization is exposed to, how much the assets are vulnerable to these threats, how high the probability that a threat will occur is, and what impact it may have on the organization.
Responsibility for the identification and management of risks is spread throughout the management in organizations. The highest responsibility lies naturally with an owner, statutory body and top management of the company.
In small organizations, the responsibility for risk management is concentrated at the level of the statutory body, since it is not effective to employ a dedicated risk manager on a full time. In medium and large organizations the responsibility is distributed to individual managers. Large organizations or organizations operating in a risky environment (e.g. banks, insurance companies, petrochemical and power industries, aerospace, transportation) have a designated specialist (Risk Manager).
“All economic activity is by definition “high risk”.