Elliot Book Chapter 9: Risk Assessment and Treatment

A set of vocabulary flashcards covering risk identification, team-based assessment methods, risk registers, mapping, treatment techniques, and project-specific risk management concepts.

Event Identification (COSO ERM)

Management identifying potential events affecting an entity’s ability to successfully implement strategy and achieve objectives.

Traditional definition of risk identification

Employing methods of identifying specific loss exposures that could interfere with achieving an organization’s primary goals.

Emerging risks

New or developing risks that an organization should define based on their potential to affect the ability to meet objectives, though identifying all of them is not feasible.

Loss histories

A risk identification tool providing quantitative and qualitative information regarding known risks, though they act as lagging rather than leading indicators.

Checklists

A tool divided into the four quadrants of risk (financial, strategic, operational, and hazard) that is easy for non-risk management professionals to use.

Escalation or threshold triggers

A technique to identify risk by comparing current transactions or events to prescribed criteria.

Process flow analysis

A technique that analyzes processes within the organization from input to output.

Delphi method

A team approach to risk identification that uses two rounds of anonymous queries to a select group of experts to reach a consensus without a physical meeting.

HAZOP

An acronym for hazard and operational study; a team-based comprehensive review of complex scientific, engineering, or computer systems to identify risks and solutions.

SWOT analysis

An acronym for strengths, weaknesses, opportunities, and threats used to analyze the feasibility of a new project or product.

Silo nature of risk

The concentration of specific types of risk in specific departmental areas, which can prevent or delay holistic risk identification.

Top-down approach

A holistic risk identification method where senior management identifies risks central to meeting organizational objectives, providing a high-level view.

Bottom-up approach

A holistic risk identification method including employee views to provide a realistic observation of operations and operating environments.

Facilitated workshops

Dynamic group discussions with leaders and stakeholders used to identify the interconnectedness and cascading effects of risks.

Scenario analysis

A technique that identifies various risks and projects a range of potential consequences to help prioritize them.

Risk register

A tool developed at the risk owner level that links specific activities to identified risks and analysis results, forming a matrix to record likelihood, probability, and impact.

Risk appetite

The total exposed amount that an organization wishes to undertake on the basis of risk-return trade-offs for one or more desired and expected outcomes.

Heat mapping

The technique of using different colors on a risk map to indicate combined levels of impact and likelihood.

Inherent risk

The level of risk before any treatment is applied; the difference between this and residual risk measures the effectiveness of current treatments.

Residual risk

The current level of risk that remains after existing risk treatment techniques have been implemented.

Optimum risk

The level of risk that is within an organization’s risk appetite.

Avoidance

A risk treatment technique that involves ceasing or never undertaking an activity to eliminate the possibility of future gains or losses.

Loss prevention

Techniques aimed at reducing the overall frequency of losses by modifying the likelihood of an event.

Loss reduction

Techniques, such as building sprinkler systems, aimed at reducing the severity of losses by modifying their impact.

Outsourcing

A method of risk sharing used to transfer noncritical operations and their related risks to another organization.

Retention

A risk financing technique involving the assumption of risk where gains and losses are kept within the organization.

Critical path

The sequence of activities in a project that takes the longest time to complete and determines the overall duration of the project.

Project constraint

Any limitation to the solutions that can be applied in achieving a project goal.

Scope statement

A clarifying project document detailing objectives, products or deliverables, potential costs/gains, and success measurements.

Political risk

Complications resulting from decisions by political or regulatory bodies that change the probability of achieving business goals or alter the value of outcomes.

Slack time

Represented as the difference between the latest and earliest start or finish times, it is the amount of time an activity can be delayed without affecting the project's overall completion.

Buffer

The sum of all slack times for activities on a critical path available to the project manager.