Risk mangement


Published on

Published in: Economy & Finance, Business

Risk mangement

  1. 1. THE CONCEPT OF RISK       Introduction to risk     Nature of risk     Types of risk     Risk Management     Risk evaluation and abatement
  2. 2. <ul><li>Defining Risk </li></ul><ul><li>Uncertainty and certainty </li></ul><ul><li>Measuring risk   </li></ul><ul><li>Probability Theory </li></ul><ul><li>Psychological Aspects of risk </li></ul><ul><li>Severity and Frequency </li></ul><ul><li>Chance </li></ul>
  3. 3. The Nature of Risk <ul><li>Pure and speculative risk </li></ul><ul><li>Fundamental and particular risk </li></ul><ul><li>Personal Risks   </li></ul><ul><li>Property Risks </li></ul><ul><li>Liability Risks </li></ul><ul><li>Risk arising from failure on part of others </li></ul><ul><li>Fidelity Risks </li></ul><ul><li>Risks due to ownership and use of Transport vehicle </li></ul>
  4. 4. We can look at risks in the following manner also Personal Property Liability Fidelity risks Risk due to ownership or use of transport vehicle Loss due to other’s failure
  5. 5.   Personal Risks <ul><li>Premature death (Dying too early) </li></ul><ul><li>Dependent old age (Dying too late) </li></ul><ul><li>Sickness or disability (Resulting in loss of income and earning power, involving additional expenses and extra needs) </li></ul><ul><li>Unemployment (Loss of income may be temporary/permanent, but routine living expenses continue. Fixed liabilities like loan repayments have still to be paid , hence further multiplying the difficulties ) </li></ul>
  6. 6. <ul><li>Property Risks </li></ul><ul><li>     Loss/damage to property </li></ul><ul><li>    Loss of use of property </li></ul><ul><li>Additional expenses occasioned by the loss of property </li></ul><ul><li>Liability Risks </li></ul><ul><li>They arise out of human mistakes often termed as civil wrongs committed by a person resulting in injury and/or death to another person, and/or loss of or damage to property. </li></ul><ul><li>Risk arising from failure on part of others </li></ul><ul><li>Risk arising due to failure on part of another person to meet a specified obligation, e.g. guarantee bonds and sureties. </li></ul>
  7. 7. Fidelity Risks : Risks arising due to dishonesty of employees and others in course of performance of their duties causing loss of money and stocks to the owner .   Risks due to ownership and use of Transport vehicle : Use of transport vehicles opens scope for two types of risks – 1 Own damage or loss to the vehicle due to a variety of pure risks including negligence 2 Death/injury to third parties and loss/damage to their property.  
  8. 8. Management of Risks Definition Management of risks is concerned with direction of purposeful activities towards the achievement of individual or organizational goals. Risk Management may be defined as “the identification, analysis and economic control of those risks which can threaten, the assets or earning capacity of an enterprise.” Risk management evaluates which risks identified in the risk assessment process require management and selects and implements the plans or actions that are required to ensure that those risks are controlled.
  9. 9.   Features of Risk Management <ul><li>To create the right corporate policies and strategy. </li></ul><ul><li>To management men and machines (processes) effectively. </li></ul><ul><li>To evaluate the risks confronted by a business. </li></ul><ul><li>To effectively handle, spread , monitor and insure the risks . </li></ul><ul><li>To introduce various plans and techniques to minimize the risks. </li></ul><ul><li>To give advices and suggestions for handling the risks. </li></ul><ul><li>To create risk awareness among the people. </li></ul><ul><li>To avoid cost, disruption and unhappiness relating to risks. </li></ul><ul><li>To decide which risks are worth taking/pursuing, and which should be shunned. </li></ul><ul><li>To fix the sum assured under the policy and to decide on whether to insure or not. </li></ul><ul><li>To select the appropriate technique or method to manage the risks. </li></ul>
  10. 10. Objectives of Risk Management <ul><li>Protecting employees from accidents that might result in death or injury </li></ul><ul><li>Due attention given to cost of handling risks. </li></ul><ul><li>Effective utilization of resources. </li></ul><ul><li>Maintaining good relations with society and public. </li></ul>
  11. 11. Risk Identification The various methods of risk identification are . <ul><li>Preparing Checklist of risks or various losses which may arise due to risks </li></ul><ul><li>On-site Inspections and risk assessment </li></ul><ul><li>Financial Statement analysis </li></ul><ul><li>Flowchart preparation and identification of risky activities </li></ul><ul><li>Interaction with employees for their views about risk exposures of business based on their knowledge and experience </li></ul><ul><li>Statistical records of occurrence of losses related to various categories of risks </li></ul>
  12. 12. Scope of Risk Management Control of Loss Financing of Loss Internal Risk Control Extra Precautions Risk Retention and Self Insurance Reduced Level of Risky Activities Non-Insurance Risk Transfers Buy Insurance Policies Contracts Investment In risk information Diversification
  13. 13. Risk Management Organization <ul><li>    </li></ul>DIRECTOR -RISK MANAGEMENT Risk Management Analyst     Insurance Manager Safety, Health and Loss Prevention Manager Claims Manager Security Manager Insurance Administrator Insurance Clerk( s) Claims Administrator Supervisor Security(s) Supervisor Safety Supervisor Industrial Hygiene Supervisor Fire Protection
  14. 14. Methods of Handling Risks <ul><li>Prevention/ avoidance of Risks </li></ul><ul><li>Reduction of Risks </li></ul><ul><li>Shifting or transferring of Risks </li></ul><ul><li>Accepting/resuming Risks </li></ul><ul><li>Spreading Risks </li></ul>