risk event classification by derek hendrikz
DESCRIPTION
Risk Event Classification by Derek Hendrikz covers, vulnerability, asset, organisational viability, performance reliability, relevance, human life and safety, liability, decision-making, process, environment, peril, hazard, pure, speculative, insurability, fundamental, particular, systematic nature of threats. www.derekhendrikz.comTRANSCRIPT
Copyright © 2014
Derek Hendrikz Consulting
www.derekhendrikz.com
5 category RISK event classification www.derekhendrikz.com
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Organisational Viability
(environmental threat)
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Organisational Performance
(process threat)
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OrganisationalReliability
(information threat)
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OrganisationalRelevance
(decision threat)
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HumanLife & Safety
(liability threat)
Risk & Uncertainty:
Level of Uncertainty: Characteristic: Example:
Totally CertainOutcomes can be predicted with precision.
Physical laws, natural sciences.
Objectively UncertainOutcomes are identified and probabilities are known.
Games of chance, cards, dice.
Subjectively UncertainOutcomes are identified but probabilities unknown.
Fire, motorcar accidents, investments.
Totally Uncertain
Outcomes are not fully identified and probabilities are unknown.
Space exploration, genetic research.
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Dichotomy Classification
Peril vs. HazardPure vs. SpeculativeNon-insurable vs. InsurableFundamental vs. ParticularSystematic vs. unsystematic
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Peril vs. Hazard
Peril relates to the source of loss, e.g. Fire, explosion, storm, earthquake, etc...
A peril gives rise to risk but are not defined as hazard themselves
Hazard relates to the agent surrounding the cause of loss, e.g. The oil drums inside the warehouse that caught fire
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Pure vs. Speculative
Pure risks only have possibility of loss (destruction of a building due to fire)
Speculative risks have the possibility of either profit or loss (profit making venture)
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Non-Insurable vs. Insurable
Most pure risks are insurable (destruction of building due to fire), but not all (destruction of building due to war)
Surprisingly few risks are insurable
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Fundamental vs. Particular Fundamental risks arise when a multitude of
losses can be traced to a single source in origin and in consequence
Most fundamental risks such as war and recession originate in the economic, political or social interdependency of society.
Particular risks give rise to losses that have their origin in discrete events, which are essentially personal in cause (damage to a building, etc)
Fundamental / particular classification depends on judgement
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Systematic vs. Unsystematic
Systematic risks are market related risks (e.g. Rand value against dollar value)... In other words the risk of a total system collapse...
Decrease in company share value after an announcement from the CEO is a unsystematic risk
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