DEPARTMENT OF MINES AND ENERGY
www.nt.gov.au
ADVISORY NOTE
RISK MANAGEMENT OVERVIEW
This advisory note outlines risk management techniques to ensure the
effectiveness and continuous improvement of operational risk management.
OVERVIEW
Risk management involves the identification, analysis and control of risks, and is
essential to ensure that all reasonably foreseeable impacts on an operation have
been identified and areas of opportunity are promoted. Risk management allows
operators to prioritise activities so that the risks with the greatest loss and the
greatest probability of occurring are handled first, and risks with lower probability of
occurrence and lower loss are handled in descending order. Figure 1, derived from
the Australian Standard AS/NZS 4360:2004, provides a model for continually
improving risk management.
Establish Context
Identify the Risks
Communicate
and
Consult
Analyse the Risks
Evaluate the Risks
Treat the Risks
Figure 1: AS/NZS4360:2004 Risk Management Overview
Minerals and Energy
Advisory #: AA7-021
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Monitor and
Review
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Advisory #: AA7-021
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DEFINITIONS
Table 1. Definitions adapted from AS/NZS4360:2004 Risk Management .
Risk
The chance of an event occurring that will have an impact on
objectives.
Risk Management The culture, processes and structures that are directed towards
realising potential opportunities whilst managing adverse
effects.
Risk Analysis
A systematic process to understand the nature of and to
deduce the level of risk.
Residual Risk
The level of risk remaining after implementation of risk
treatment.
Event
Occurrence of a particular set of circumstances.
Likelihood
Probability of an event occurring.
Consequence
Outcome or impact of an event.
Frequency
A measure of the number of occurrences per unit of time.
Control
An existing process, policy, device, practice, or other action that
acts to minimise risk.
Monitor
To check, supervise, observe, or measure the progress of an
activity or system on a regular basis, in order to identify change
from the performance level required or expected.
PROCEDURE
1. Establish the Context
Before risks can be identified, the company’s objectives and environment in which it
operates must first be considered to develop an awareness of the company’s
inherent strengths and weaknesses. Threats and opportunities the company may
have exposure to may also be considered. Broad considerations include:
1. Goals, including safety, environmental and business requirements.
2. Statutory and stakeholder requirements.
3. Policies, organisational structure, management systems and culture.
4. Geographic, economic and available technology considerations.
From this assessment, risk control expectations and targets can be derived.
Mechanisms can be chosen for controls that are appropriate to the organisation
status.
2. Identify the Risks
Systematic risk identification is essential to ensure all sources of exposure are
considered.
a. Identify and define key activities and processes
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The object of this step is to segment the operation into key areas that may then be
studied in further detail for risks.
For example, an extractive operation may break its key areas into clearing, mining,
processing, product handling and storage, rehabilitation and close out to reflect the
lifecycle of activity in an area.
b. Identify potential issues
The aim is to identify events which may affect each of the key areas identified in Step
A. This can be done through identification of safety or environmental aspects from
company policies, hazard identification and potential or historical incidents.
c. Identify exposure pathways
Once operational issues are identified, consideration should then be given to
potential scenarios that may cause the event to occur. It is essential to ensure all
significant pathways are detailed. One technique available for this process is to
establish a matrix of event vs. possible impacts; where an activity has the potential to
trigger an undesirable event a potential risk exists. These activities/impact
relationships may be derived from many sources including brainstorming, checklists,
scenario analysis and external reviews.
3. Analyse the Risks
Once a comprehensive list of potential risks has been developed, the likelihood of
that risk being triggered and the associated consequences once triggered needs to
be analysed. This will help separate critical operational risk from minor acceptable
risks in addition to providing an order of action based on critical exposures. When
assessing the likelihood and consequences of a risk, evaluation could include:
 Operator knowledge and past experience.
 Published literature.
 Specialists and expert judgements.
For each risk identified the likelihood of the risk occurring and the consequences of
the risk exposure should be quantified using a risk matrix like the one shown in
Figure 2.
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CONSEQUENCE
Low
Medium
High
Little to no impact
Medium term -ve
impact
Irreversible or long
term –ve impact
4
7
9
2
5
8
1
3
6
LIKELIHOOD
High
>75% Chance event will
occur in life of plan
Medium
25%<>75% Chance
event will occur in life of
plan
Low
<25% Chance event will
occur in life of plan
Figure 2 Risk Assessment Matrix
Critical Risk
High Risk
Moderate Risk
Low Risk
Example:
Uranium Exploration: drilling
Likelihood: Probability of intercepting groundwater during drilling – MEDIUM
Consequence: Release of radioactive water into natural drainages – MEDIUM
Risk Score: 5 – Moderate Risk
Tailings Dam Leak
Likelihood: Probability of minor leaks occurring – MEDIUM
Consequence: Contamination of groundwater, vegetation mortality – MEDIUM
Risk Score: 5 – Moderate Risk
Likelihood: Probability of tailings dam wall failure – LOW
Consequence: Contamination of groundwater/surface water, vegetation
mortality, fauna loss - HIGH
Risk Score: 6 – High Risk
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4. Evaluate the Risks
Based on the risk analysis, decisions are made about which risks need treatment and
treatment priorities. The objectives of the company and the extent of opportunity that
could result should be considered.
5. Treat the Risks
Once the magnitude of the risks has been established, control techniques should be
identified which not only reduce the risk score, but also fulfil all requirements of the
context developed in step 1. Often risk control processes are a balance of cost,
effectiveness and environmental requirements.
Control methods should be considered in conjunction with the following hierarchy of
controls, listed in order of precedence:
Elimination
Substitution
Re-engineering
Isolation
Administration
PPE
Can the risk source be removed from the process?
Can the risk source be substituted?
Can the risk source be re-engineered?
Can the risk source be isolated?
Can the risk source be minimised administratively?
(i.e. procedures and training).
Can the risk source be minimised by utilising Personal
Protective Equipment?
PPE should only be used as a last resort, but can be used in conjunction with other
controls. Whichever risk control process is utilised, it is essential facets of
implementation be appropriately planned and assessed.
6. Monitor and Review
To ensure risks are effectively managed, risks should be monitored and reviewed
regularly (either annually, biannually or when changes or new procedures have been
implemented). This ensures the risk treatment in place is appropriate for the level of
risk.
7. Continual Improvement
Risk management is not a static process as the environment in which operations
exist is often dynamic with new control methods, stakeholder requirements and other
aspects often evolving. To this end the risk process should target continual
improvement with the focus being on continually attempting to minimise risk levels.
For further information or advice on this subject please contact
Mining Environmental Compliance
Department of Mines and Energy
GPO Box 4550, Darwin, Northern Territory 0801
Phone : +61 8 8999 6528 Fax : +61 8 8999 6527 E-mail : mineral.info@nt.gov.au
Website : www.minerals.nt.gov.au
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