Strategic Formulation of Mitigating Risk by Using Fuzzy TOPSIS Model Based on House of Risk Framework

Abstract

Risk management is one of important factor in running a business which needs to be managed well because it will affect in the process of decision making. The effective implementation of risk management is started by conducting risk monitoring, establishing risk assessment context, detail identification and analyzing risk, evaluating risk, and providing treatment to the risk. There are several methods to conduct the process of risk management i.e. FMEA, FMECA, HOR, and etc. This research tries to identify the potential risk and recommendation strategy of mitigation action using proposed method Fuzzy Logic modified with Technique for Order Performance by Similarity to Ideal Solution (TOPSIS) based on House of Risk Framework (HOR). This research took place in PT. Qumicon Indonesia which concerned on business process at the company production division. In identifying the potential risk and the mitigation strategy, this research will consider the severity risk level of risk event and probability occurrence of risk agent. From HOR phase 1, it is identified 18 risk events and 21 risk agents as a cause of risk. Then by conducting Pareto diagram analysis with comparison 80:20, 16 risk agents were selected to be the prioritized risk that will exposed to the strategy of mitigation action. In HOR phase 2, this research obtains 10 strategies of mitigation action by considering with the mitigation action effectiveness and the type of risk that was selected. In implementing the strategy, it depends on the company's policy and condition at that time.