Develop a risk management system

Realization of the investment project involves overcoming risk situations, which, in case of their realization, can essentially complicate or even to make impossible achievement of the purposes of the project.

Risks can be divided into pure and speculative:

— The pure risk means potential possibility to suffer losses;
— Speculative risk
— potential possibility both to get something, and to lose.

Risk managements gives possibility of achievement of the various purposes which, in essence, are Company strategic targets, for example:

— Increasing the market value of the Company;
— Maintenance of the set level of safety;
— Reducing the influence on the environment;
— Observance of requirements of technical standards;
— To achieve a given level of capacity utilization.

Often these purposes are achieved in the complex process of risk minimization. But the balance of costs and the comprehensible reached level of this or that purpose can be various. The concept of risk management is to identify key risks and workings out of methods of their optimum minimization depending on the chosen strategic targets. Strategic objectives of the Company at managing may change depending on those or other changes in the internal and external environment.

Implementation of risk management systems includes two stages:
— forming a strategy of risk management;
— the organization’s risk management process.

For formation of strategy of risk management it is necessary:
— Identify strategic objective in risk management;
— To formulate an unambiguous description of the main strategic objective, all other strategic target of the Company should be formulated as a constraint to the main strategic objectives;

— All goals must be described in measurable quantities.

Managerial process by risks consists in the organization
of a cycle of Risk managements.

The cycle of Risk managements represents the closed sequence of following stages:
— Revealing and identification of risks;
— Estimation of risks, definition of strategy of risks (comprehensible level of the risks, the forbidden risks, the plan for development and control of risks);
— Working out and realization of the program of management by risks (insurance, reservation);
— Monitoring of risks (a database, reports, administrative decisions).

The risk management system at each stage of the closed cycle allows to solve a problem of an optimum parity of expenses and the reached result on minimization of risks depending on the chosen strategic target.

The risk-management considers risks as possibility of reception of incomes and increasing the market value of the Company. Risk management is not costs decreasing a Company value. It is possible to increase and decrease the level of the risk during risk management process — it means risk quality control.

In modern conditions the basic subject of risk-management is purposeful protection of the capital and management of company’s market value. Thus, a risk-management strategic target is directly market value of the Company.

When you build a risk management system you must
continually monitor the following tasks:

1. How to identify risks?
2. How to measure the risks?
3. How to determine the level of acceptable risk?
4. How to develop influence actions on risk?
5. How to organize the monitoring and control system of risk management?

The targets of Risk Management System

— Ensure a minimum level of support for business processes in the company for continued growth in the value of the company;
— Reflection of the existing system of risk management of the Company to its potential investors;

Develop a system of operational, industrial and technological risks, under which, for the purposes of risk management refers to:

Technological risks — risks of failure of process equipment;
Operational risks — the risks of improper execution of technological process

Process risks — the risks of default of the production program because of improper organization of the production process.

Project Risk Management

The main approaches to the management of technical risk projects have found the most fully reflected in the standard ISO 31000:2009 «Risk Management Principles and Guidelines.»
There are other standards such as ANSI / PMI 99-001-2004, which is known as the PMBOK, relating to organizational maturity in project management, project manager competency, and other items, these standards produce what is generally considered good practice in the areas of their application.

It is speculative risk makes a business attractive, since it creates the potential for profit, including through the implementation of various projects.

On stages of realization of the project, the emergence of risk situation, usually discussed in terms of «pure» risk, ie the possibility of incurring losses.

Technical risk of the project can be defined as uncertain event or a condition which in case of occurrence has negative influence at least on one of the project purposes, such as time, cost, content or quality.

«Risk Management», whose task is to identify, analyze and take control of that technical risks that could threaten the project at stage of its realization.

The project — a temporary venture, designed to create unique products, services or results.

Technical risks arise and may arise at any stage.

Management of technical risks of the project includes:

Determining the requirements of applied technology;
Setting clear and achievable technical purposes;
Adjusting the conflicting technical and technological requirements in quality, content, timing and costs;

Correcting of technical specifications, plans and approach.
The original idea for the interaction between the processes of managing technical risks the project is the cycle of «planning — execution — testing — influence.»

Stages of the project generating the technical risks:

• pre-feasibility study (the error in the choice of the technical concept)
• Feasibility Study (the error in the choice of technology used)
• Conceptual design (the error in the choice of technical implementation)
• Detailed design (the error in the choice of technical implementation methods, equipment selection)
• Stage of implementation (used the wrong technology of construction and installation)
• Commissioning tests (start-up led to the failure).

The reason of occurrence of technical risk is the uncertainty which is present at all stages of any project.
Known technical risks are those risks which are identified and analyzed. In the relation of such risks it is possible to plan reciprocal actions (to change technology, the list of the used equipment, building methods, etc.).

For unknown technical risks it is impossible to plan reciprocal actions. In such cases the reasonable decision is allocation of the general reserve on unforeseen circumstances in which these unknown risks, and also all known risks for which working out of concrete measures of reaction is not represented economically effective or possible will be included.

LLC «RiskTEKonsult» in interests of financial institutions which finance realization of various projects performs works on audit of technical risks.

The program assumes studying and granting in a documentary kind of results of an estimation of efficiency of actions for reaction to the technical risks, risks related to the identified risks, studying of principal causes of their occurrence, and also an estimation of efficiency of managerial process by risks.

Work is made out in the form of the report.
Preparation of the report about engineering estimations of technical risks of the investment project (destruction and damage of property, breakage of building cars and the equipment and breaks in building) for insurance.
Estimation possible the maximum possible loss, the most probable loss, the maximum liquidated damage for various programs of Risk managements.

Estimation of a current condition of possible technical realization of the project.
Estimation of practice of prevention of losses from technical risks.

The special attention at carrying out of audit of technical risks is given to working out of the recommendation about methods of compensation of the damage caused to the financial organization which can be caused in case of realization of a brave situation when preventive actions for Risk management have not given results or the residual risk was realized.
Principal cause of possible loss is the delay of terms of realization of the project because of display of technical risk which leads to untimely return of funds directed to the project.