Risk mapping is a process whereby an organisation assesses the types and degrees of risk to which the business is exposed.
Risk mapping can be broken down into three stages.
1. Determine which risk categories are involved
2. Estimate the levels of exposure in terms of size and degree.
3. Rank the risks in terms of importance they should be given when allocating the organisation`s risk capacity.
Stage 1. / What risk categories?
– Financal risks (Credit, Interest Rates, Forex, Cash Flow, Gearing)
– Organisational (Operational) risks (Personell, Process, Materials, Logistics, R & D)
– Market risks (Market Share, Distribution, Total Demand, Product Range)
– Environmental risks (Politics, Society, Technology, Economy)
Stage 2. / Estimating exposure to risk
– why the organisation is exposed and wether the risk
– the size of the risk (graded perhaps from 1 to 10)
– the warnings of possible catastrophic outcomes
– the costs of accepting or avoiding risks
– the identification of links to other risks
Stage 3. / Allocating risk capacity
can be done by ranking risks as follows
1. unavoidable, core activities
2. risk unavoidable except by ceasing non core activity
3. avoidable risk, core activities
4. avoidable risk, non-core activities
5. selectable risks
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