Lecture Notes on Risk Management

Introduction to Risk

• Definition of Risk:
  • Essential to understand for effective risk management.
  • Refers to the "effect of uncertainty on objectives" according to ISO 31000.

ISO 31000: Risk Management Standard

• Overview:
  • Published by International Standards Organization (ISO).
  • Title: Risk Management Principles and Guidelines.
  • Key components:
    • 11 principles of risk management.
    • A framework for implementation.
    • A generic process for application.
    • Includes a set of clear and concise definitions.

Key Elements of Risk

• Uncertainty:
  • All risks are inherently uncertain.
  • Uncertainty is a critical factor in defining risk.
• Effect on Objectives:
  • Risks have impacts that can affect objectives.
  • Importance of linking risks to objectives.

Other Standards in Risk Management

• Though multiple standards exist, they share core concepts with ISO 31000:
  • Project Management Institute Standard:
    • Defines project risk as an uncertain event or condition with positive or negative effects on project objectives.
  • Other Risk Types:
    • Operational, environmental, and financial risk standards also emphasize uncertainty and the effect on objectives.

Distinction Between Uncertainty and Risk

• Critical to understand the fundamental difference between the two concepts.

Conclusion

• Reinforce understanding of the clear definition of risk as per international standards.