1. Risk Classification Systems

2. Short term risk
Medium term risk
Long term risk
These are related to operations, tactics and strategy respectively.

3. Short term risk
It has the ability to impact the objectives, key dependencies and core processes, with the impact being immediate.
It can cause disruption at the time to operations immediately at the time of event occurs.
It is prominently hazardous risk.
Short term risk usually impact the ability of the organization to maintain efficient core processes that are concerned with the continuity and monitoring of routine operations. sk

4. Medium term risk
It has a ability to impact the organization in following a (short delay) after the event occurs.
Typically the impact of medium risk would not be apparent immediately, but would be apparent within months, or at most a year after the event.
It is often associated with projects, tactics, enhancement, product launch and developments.

5. Long term risk
It has the ability to impact the organization some time after the event occurs.
Typically the impact could occur between one to five years (or more)after the event.
It is related to strategy.

6. Purpose of risk classification system.
In order to identify the risk facing an organization, a structure for risk identification is required.
Formalized risk classification system enable the organization to identify where similar risk is exit within organization.
It also enables the organization to identify who should be responsible for setting the strategy for management of related or similar risk.

7. It also enables the organization to better identify the risk appetite, risk capacity and total risk exposure in relation to each risk, group of similar risk or generic type of risks.
The FIRM risk scorecard provides such a structure, but there are many such risk classification systems available.
It builds on different aspects of risks, including timescale of impact, nature of impact, whether a risk is hazard, control or opportunity and overall risk exposure and the risk capacity of the organization.

8. FIRM scorecard provide for classification of risks as being primarily financial, Infrastructure, Reputational or Market place in Nature.
This score card can be used as template for the identification of corporate objectives, stakeholder expectations and key dependencies.
It is one of the important tool and technique.
It facilitates robust risk assessment by ensuring that the chances of failing to identify a significant risk are much reduced.

9. It is important for the organization to decide which risk classification system which fully satisfy the needs and requirements.
Risk can be grouped according to the nature of the risk, the source of risks, and/or the nature of impact.

10. Examples- COSO IRM Standard BS 31100 FIRM risk scorecard PESTLE.
There are similarities in most of these systems, although PESTLE takes slightly different approach.
It should be noted that identifying risk as:
Hazard, control or opportunity ;
High ,medium or low;
Short term, medium term and long term should not be considered to be formal risk classification system.

11. Risk classification systems
Standard or Framework
COSO
IRM
BS31100
FIRM
PESTLE
Classification Headings
Strategic
Operations
Reporting
Compliance
Financial
Operational
Hazard
Program
Project
operational
Infrastructural
Reputational
Market Place
Political
Economic
Sociological
Technological
Legal
Environmental

12. FIRM risk scorecard Attributes of FIRM risk scorecard Financial
Infrastructural
Reputational
Market Place
Description
Risk that can be impact the way in which money is managed and profitability is achieved.
Risk that will impact the level of efficiency and dysfunction within the core processes.
Risk that will impact the desire of the customers to deal or trade and the level of customer relation.
Risk that will the impact the level of the trade or expenditure and customer retention.
Internal or External Risk
Internal
External
Quantifiable
Usually
Sometimes
Not always
Yes

13. Measurement (performance indicator)
Gains or loss from internal financial control
Level of efficiency in process or operations
Nature of publicity and effectiveness of market profile
Income from commercial and market activities.
Performance gap
Procedures
Failure of procedures to control internal financial risks
Process
Failure of processes to operate without dysfunction
Perception
Failure to achieve desired perception of the organization
Presence
Failure to achieve required presence in the market place
Control mechanisms
Delegation of authority
Internal control
Process control
Loss control
Insurance and risk financing
Marketing
Advertising
Reputation and brand protection
Strategic and business plan
Opportunity investment

14. PESTLE risk classification system
Category of risk
Description
Political
Tax policy, employment laws, environmental regulations, trade restrictions and reforms, tariff and political stability
Economical
Economic growth/decline, interest rates, exchange rates and inflation rates, wage rates, minimum wage, working hours, unemployment (local and national) credit avaibility, cost of living etc.
Sociological
Cultural norms and expectations, health consciousness, population growth rate, age distribution, career attitudes, emphasis on safety, global warming
Technological
Technology changes that impact your product or services, new technologies, barriers to entry in given markets, financial decisions like outsourcing and supply chain.
Legal
Changes in legislation may impact the employment, access to materials, quotas, resources, imports/exports , taxation etc.
Environmental
Ecological and environmental aspects, although many of these factors will be economic or social in nature.

15. Advantages of a PESTLE analysis
Simple framework
Facilitates an understanding of a wider business environment.
Encourages the development of external and strategic thinking.
Enables the organization to spot business opportunities and exploit them fully.

16. Disadvantages of PEETLE
Requires different people being involved, each having different perspectives.
Risk of capturing too much data is that it may make it difficulties to see priorities.
Access to quality external data sources can be time consuming and costly.

17. Hazard, control and opportunity risk Personal issue grid
Financial risks- procedure gaps: How well do your procedures manage your finances?
Dependency
Long term
Medium term
Short term
Investments
Pension arrangements
Property purchase
Share purchase
Business opportunities
Betting habits
Insurance arrangements
Expenditure
Accommodation holiday pattern
Car purchase
Rail season ticket
Credit card ownership
Shopping behavior
Travel arrangements

18. Infrastructure risk- process gap: How well does your body facilitates your processes?
Dependency
Long term
Medium term
Short term
Health
Family history
Personal lifestyle
Vegetarianism
Medical treatment
Dieting
Weight gain
Exercise
Alcohol and drugs
Illness and accident
Emotional
Marriage and children
Ethnics origins
Sexuality
Friendships
Cosmetic surgery
Hobbies and
Sex
Reputational risks- perception gap: how you are perceived by your peer group?
Dependency
Long term
Medium term
Short term
Personal
Personality
Criminal behavior
Neighborhood
Mood and temperament
Charity work
Clothes
Personal hygiene
Charity donations
Professional
Intelligence and
Behavior pattern
Qualifications
Changing jobs
Attending training
Continuous learning

19. Market place risk-presence gap: what is your presence in market place
Dependency
Long term
Medium term
Short term
Occupation
Career selection
education
Society memberships
Presenting training
Society activities
Income
Ambition
Seniority
Extra part -time work
Sales of share
Selling possessions
Casual works.