Corporate Risk Management, 2nd Edition

10

Risk Management at Corporate, Strategic Business and Project Levels

10.1 INTRODUCTION

The previous chapters have discussed risk management tools and techniques, stakeholders’ involvement and the structure of corporate organisations. This chapter presents a model illustrating the sequencing of risk assessment, risk management techniques and shareholder involvement at corporate, strategic business and project levels.

10.2 RISK MANAGEMENT

Figure 10.1 illustrates the levels of a typical organisational structure which allows risk management to be focused at each level. By classifying and categorising risk within these levels it is possible to drill down or roll up to any level of the organisational structure. This should establish which risks the project investment is most sensitive to so that appropriate risk response strategies may be devised and implemented to benefit all stakeholders.

Risk management is seen to be inherent to each level, although the flow of information from level to level is not necessarily on a top-down or bottom-up basis (Merna 2003). The risks identified at each level are dependent on the information available at the time of the investment and each risk may be covered in more detail as more information becomes available.

In many cases decisions will be made solely on qualitative assessments. In other cases decisions will be made after a quantitative assessment on the basis of computed metrics such as IRR and NPV.

10.3 THE RISK MANAGEMENT PROCESS ...