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The Anatomy of Risk

SERIES ARTICLE

Risk Doctor Briefing

By Magda Stepanyan

CEO, the Risk Society
The Risk Doctor Partnership

The Netherlands

 


It is clearly important for us to understand the nature of a risk properly if we are to manage it effectively. Many people only consider a limited number of risk characteristics, leading to a limited ability to manage risk. Effective risk management requires a deeper understanding.

One way to improve understanding is to explore the “anatomy of risk”. Anatomy can be defined as “separating or dividing into parts for detailed examination.” If we separate and divide risk into its constituent parts, we find seven elements. Four of these relate to the nature of the risk itself, and three are connected to people.

Risk-related elements includes:

1. Objectives: What do you want to achieve? Risks do not exist in isolation: they are always linked to objectives. Opportunities (positive risks) facilitate the achievement of objectives, and threats (negative risks) are a hindrance.

2. Change: What future events could impact your objectives? How might the external and internal environments be different from what you expect? Understanding the potential for change is the starting point for risk identification and analysis.

3. Causes: What might cause those changes? It is much harder to prevent threats or capture opportunities if you don’t know where they come from.

4. Impact: What are the consequences on your objectives if each risk materialises? Understanding consequences allows you to prepare for risk mitigation (in case of potentially negative consequences) and risk exploitation (in case of potentially positive consequences).

Many people think that these four risk-related factors are sufficient to provide a complete picture of a risk. But risks are inevitably connected with people. Risks often arise as a result of our actions, either directly or indirectly. Once a risk has been identified, the reactions of those people affected can further complicate the situation.

These reactions are formed by people’s needs and interests, as well as their moral and ethical principles. As a result, there are three additional people-related elements to the anatomy of risk:

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About the Author


Magda Stepanyan, MA, MSc, CIRM

Risk Society

 




Magda Stepanyan
is founder & CEO of the Risk Society consultancy (http://www.risk-society.com/). She holds an MA in Sociology from Yerevan State University, Armenia, an MSc in Public Administration from Leiden University, the Netherlands, and the International Certificate in Risk Management from the Institute of Risk Management (IRM).

Magda’s expertise is in resilience programming, integrated risk management (IRM), risk-informed strategy planning and implementation, disaster and climate risk management, horizon scanning for strategy and policy development, monitoring and evaluation. She has more than 15 years of management and consultancy experience, working with organizations such as the EC, UN, WB, Red Cross, and others. In 2012 Magda authored a UNDP Technical Paper on “Risk Management for Capacity Development Facilities”.

Magda can be contacted at mailto:magdastepanyan@yahoo.com