Finance

1. RISK
MANAGEMENT
CHAPTER 11

2. RISK MANAGEMENT
CHAPTER 11
-Define as systematic approach in
identifying, analyzing, and controlling
areas or events with a potential for
causing unwanted change.

3. RISK MANAGEMENT
CHAPTER 11
1. Create value
2. Address uncertain and assumptions;
3. Be an integral part of the organizational processes and
decision-making;
4. Be dynamic, iterative, transparent, tailorable and responsive
to change
5. Create capability of continual improvement and enhancement
considering the best available information and human factors
6. Be systematic, structured and continually or periodically
reassessed.
BASIC PRINCIPLES OF

4. RISK MANAGEMENT
CHAPTER 11
PROCESS OF
1. ESTABLISH THE CONTEXT
2. Identification of potential risks
3. Risk Assessment.

5. RISK MANAGEMENT
CHAPTER 11
ELEMENTS OF
 Identification, characterization and assessment of threats;
 Assessment of the vulnerability of critical assets to specific
threats.
 Determination of the risk (i.e. the expected likelihood
consequences of the specific types of attacks on specific
assets.
 Identification of ways to reduce those risks.
 Prioritization of risk reduction measures based on a
strategy.

6. RISK TERMINOLOGIES
CHAPTER 11
RELEVANT
1. Risks Associated with Investments
A single risk premium must compensate the
investor for all the uncertainty associated
with the investment

7. 1. RISK ASSOCIATED WITH INVESTMENTS
CHAPTER 11
A. Business Risk
B. Financial Risk
C. Liquidity Risk
D. Default Risk
E. Interest Rate Risk
F. Management Risk
G. Purchasing Power Risk

8. RISK TERMINOLOGIES
CHAPTER 11
RELEVANT
2. Risk Associated with Manufacturing, Trading
and Service Concerns
A. Market Risk
B. Operation Risk
C. Financial Risk
D. Business Risk

9. RISK ASSOCIATED WITH MANUFACTURING,
TRADING AND SERVICE CONCERNS
CHAPTER 11
A. Market Risk
Product Risk
Competitor Risk

10. RISK TERMINOLOGIES
CHAPTER 11
RELEVANT
2. Risk Associated with Manufacturing, Trading
and Service Concerns
A. Market Risk
B. Operations Risk
C. Financial Risk
D. Business Risk

11. 2. RISK ASSOCIATED WITH MANUFACTURING,
TRADING AND SERVICE CONCERNS
CHAPTER 11
B. Operations Risk
 Process Stoppage
 Health and Safety
 After Sale Service Failure
 Environmental
 Technological Obsolescence
 Integrity

12. RISK TERMINOLOGIES
CHAPTER 11
RELEVANT
2. Risk Associated with Manufacturing, Trading
and Service Concerns
A. Market Risk
B. Operations Risk
C. Financial Risk
D. Business Risk

13. 2. RISK ASSOCIATED WITH MANUFACTURING,
TRADING AND SERVICE CONCERNS
CHAPTER 11
C. Financial Risk
Interest Rate Volatility
Foreign Currency
Liquidity
Derivative
Viability

14. RISK TERMINOLOGIES
CHAPTER 11
RELEVANT
2. Risk Associated with Manufacturing, Trading
and Service Concerns
A. Market Risk
B. Operations Risk
C. Financial Risk
D. Business Risk

15. 2. RISK ASSOCIATED WITH MANUFACTURING,
TRADING AND SERVICE CONCERNS
CHAPTER 11
D. Business Risk
 Regulatory Change
 Reputation
 Political
 Regulatory and Legal
 Shareholder Relations
 Credit Rating
 Capital Availability
 Business Interruptions

16. RISK TERMINOLOGIES
CHAPTER 11
RELEVANT
3. Risk Associated with Financial Institution

17. POTENTIAL RISK TREATMENT
ISO 31000 also suggests that once the risks have been
identified and assessed, techniques to manage the risks
should be applied.
1. Risk Avoidance
2. Risk Reduction
3. Risk Sharing
4. Risk Retention

18. AREAS OF RISK MANAGEMENT
The most commonly encountered areas of risk management
include:
 Enterprise risk management
 Risk management activities as applied to project
management
 Risk management for megaprojects
 Risk management of information technology
 Risk management techniques in petroleum and natural
gas

19. STEPS IN THE RISK MANAGEMENT PROCESS
1.Set up a separate risk management committee chaired by a board
member;
2.Ensure that a formal comprehensive risk management system is in
place;
3.Assess whether the formal system possesses the necessary
elements;
4.Evaluate the effectiveness of various steps in the assessment of
the comprehensive risks faced by the business firm;
5.Assess if management has developed and implemented the
suitable risk management strategies and evaluate their
effectiveness;

20. STEPS IN THE RISK MANAGEMENT PROCESS
6. Evaluate if management has designed and implemented risk
management capabilities;
7. Assess management’s efforts to monitor overall company risk
management performance and to improve continuously the
firm’s capabilities;
8. See to it that best practices as well as mistakes are shared by all;
9. Assess regularly the level of sophistication of the firm’s risk
management system
10.Hire experts when needed.

21. THANK
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