Despite the best laid plans and controls, things often go wrong in business. Take these two examples:
Buncefield Disaster
On December 11 2005 an explosion occurred at the Buncefield oil depot in Hertfordshire, leading to Europe's biggest peacetime fire. http://www.guardian.co.uk/uk/buncefield
Heathrow Terminal Five Opening
Heathrow Terminal Five opened in March 2008. On the day of opening it quickly became apparent that the new terminal was not operating smoothly, and British Airways cancelled 34 flights and was later forced to suspend baggage check-in. Over the following 10 days some 28,000 bags failed to travel with their owners and over 500 flights were cancelled
A key question, of course, is - what is risk? Risk is
The possibility of loss
A threat that may prevent or hinder the ability to achieve business objectives
The chance (probability) that a hoped-for outcome will not occur
There are various possible approaches to managing risk:
Ignore it (wait and see)
Reduce probability of risk
Reduce or limit the consequences
Share or deflect the risk (e.g. by insurance)
Make contingency plans - prepare for it
Adapt in order to maintain performance
Treat it as an opportunity- particularly if it affects other competitors
The two main issues for businesses to consider when addressing risk are, therefore:
Risk management
The identification and acceptance or offsetting of the risks threatening a business
Contingency planning
A plan for unforeseen events, including back up procedures, emergency response and post-event recovery
