Managing specialized risk

1. MANAGING SPECIALIZED
RISK

2. MANAGING PROPERTY RISK
• AVOIDING PROPERTY RISK
- Risk control measures that may be applied in the management of property risks
include risk avoidance and risk reduction
-The opportunities for avoiding property risks is limited by the organization’s need
for assets required to achieve its objectives
-The organization requires assets to achieve its goals and while the cost of risk
associated with these assets can be reduced, it can rarely avoided
• NONINSURANCE TRANSFERS
-Under the terms of a lease, represent a common method of managing property
risks
For example:
At termination of this lease, lessee shall return the property to the lessor in the
same condition as at the commencement of the lease, natural wear and tear only
expected

3. -By agreeing to return the premises in the same condition as the commencement
of the lease, the lessee has, in effect, taken on the risk of damage from all perils.
-Note that negligence is not a consideration. If the property is damaged or
destroyed by any cause-other than normal wear and tear-the lessee become
responsible for restoration.
-Responsibility for insuring the property (or otherwise financing the risk of
damage) is shifted from the lessor to the lessee
• FIRE PREVENTION AND LOSS CONTROL
- Analyzing fire hazards
-Factors in fire losses
-Fire insurance Rating Systems
-Housekeeping
-Automatic Sprinkler System

4. • RISK CONTROL MEASURES FOR OTHER PERILS
-Windstorm and hail-Obvious strategy of locating away from areas with frequent
severe storms, wind-resistive structure s represent the most effective strategy.
Buildings with large areas of glass or inadequately anchored roof surfacing are
more susceptible to wind-storm damage than structures without these
vulnerabilities
-Explosions-include combustion explosions from the ignition of gases, dust, or
other explosive materials or from pressure devices. Can use automatic fire
extinguishing system or explosion suppressions equipment
-Water damage-inspection and maintenance of plumbing system and roofs,
windows, and doors as the control measures. Also can be protect by coverings and
by skidding. Skidding means the storage of property on wooden pallets or skids.

5. -Vandalism and Malicious Mischief-committed by children and young adult areas
with large populations of children. Can avoid with security personnel and
perimeter security as an effective loss control measures
-Earthquake-avoid with earthquake-prone areas and also another way is with
earthquake-resistant construction
-Boiler Explosion and Machinery Hazards-Always do the inspection and
maintenance and insures under a boiler and machinery policy by qualified
insurance company engineers to determine their operating condition and to be
sure that such equipment meets the engineering requirements of the insurer.
-Salvage Operations-Salvage refer to the residual value of property that has been
damaged. Salvaging is the cost of saving property from loss, during and after the
occurrence of damage. Salvage operations include separating and putting under
damaged property in order, inventorying, reconditioning, and selling the salvage.

6. • PROPERTY RISK FINANCING
-Refer to the insurance coverage that is available to the risk manager when dealing
with property exposures. Can be in direct, which consists of the loss of the asset
itself and indirect, which results from loss of use of the asset
-Fire insurance is the standard policy for insuring most types of business property.
-Fire coverage is provided for:
a) Building
b) Personal Property
c) Personal Property of Others

7. MANAGING CRIME RISK
• No one knows exactly how much business organization loses to crime each year
• Happen maybe because do not have a good record and inventory management
and does not realize how much merchandise is unaccounted for.
-CRIMES AGAINST BUSINESS-are classified according to the perpetrator as
employee crime and nonemployee crime(burglary, robbery, shoplifting, forgery
and bad cheque)
-LOSS CONTROL AND CRIME-because criminal acts of people, techniques aimed at
preventing criminal loss are effective in two respects, first they make criminal acts
more difficult for those who are inclined to commit such acts and by making the
acts more difficult, loss prevention and control measures discourage attempts by
criminals

8. Employee Crime
• The Deterrence Factors
• Employee Dishonesty Loss Control
• Selection of Employees
• Internal control
• Cash Control Procedures
• Disbursement Procedures
• Accounts Receivable and Sales Procedures
• Procedures for Purchasing, Receiving, and Accounts Payable
• Audits
• Prosecution of Dishonest Employees

9. Nonemployee Crime Loss
• Much nonemployee crime is “crime of opportunity”
-Barriers
-Burglar Alarm System
-Types of Alarm System
-Alarm Transmission Lines
-Nighttime Security
-Holdup alarm systems
-Cash Handling
-Safe Security
-Merchandise Security (Shoplifting)
-Other physical security measures( guards, use of dogs for Asset Protection, Closed-
circuit Television and Computer Security)

10. MANAGING THE E-RISKS
• The risk associated with e-mail, electronic fraud, and system penetration requires
special attention.
a) E-MAIL RISK MANAGEMENT-it is widely recommended that the following policies to be
imposed:
-Prohibiting the downloading of offensive material
-Barring the sending of offensive e-mail
-Warning against the sending of commercially confidential material
-Ensuring that e-mails have a suitable disclaimer
-Providing their employees with a clear indication of the circumstances under which e-
mail will be monitored
-Making it clear that all e-mail attachments that originate from outside of the
organization should be scanned for viruses before opening
-Warning staff that e-mails are classified as documents and can be used in court law;
and
-Notifying staff that a breach of the e-mail policy may lead to disciplinary action and
possibility their dismissal

11. b) MANAGING THE FINANCIAL RISKS OF AN E-BUSINESS
-It is very important to know and to understand how online developments will
enhance profitability
-In a e-business venture, without thinking where the profits will come was one of
the principal reasons why so many dotcom company failed.
-First, it is essentials that the existing business processes are reviewed to
understand how online developments will enhance profitability
-Second, it is important to understand key drivers in the e-business.
-Third, a project plan for e-business should be developed
- Finally, once operational, it is essential that key performance indicators are
established that allow the organization to monitor the financial position.

12. c) DEVELOPING A RELIABLE INTERNET PRESENCE
- Organization needs to adopt the following strategies to ensure that they deliver
an end product that their customers will use
-Maintain a strategic perspective – helps to guard against over-commitment
-Never compromise on testing – failing to test internet applications thoroughly can
be highly damaging.
d) ONLINE FRAUD
-Need to recognize the warning signs and then check the sale to assess whether
there is deliberate attempt to defraud the company of its services. Example of
warning signs :
• Larger than normal orders
• Order containing more than one of the same items
• Urgent orders
• Shipping orders to an address other than the billing address

13. d) UNAUTHORIZED ACCESS
-very important to understand and manage the risk associated with unauthorized
access because the increasing connectivity with globalization
-must understand the threats, includes hackers, vendor/suppliers, ex-employees,
business rivals, foreign government agents, subcontractors and others
-to assess the motivations of the threat by analyzing why they would want to hack
your computers
-Strongly recommended:
* Administrative Security-establish basic rules for internet use and training
all staff
*Operational Security-underwriting the security of the organization’s system
and data
*Physical Security-creation of standards for all systems that are connected
with internet
*Other security measures-internal computer forensics

14. Managing Technical Risk
• Involve how to manage risks of bringing a new technology product to the market
• Few strategies for dealing with the combination of technical failure and market
failure when introducing new technology product:
- Obsolete Technology
-Innovative product development
Product Licensing
Product Collaboration
Product Pattern

15. Managing International Risk
• Transnational corporations have had to become better at managing the risk associated
with the environment, the exploitation of their workforce and their presence in
countries with poor human right or which are war-torn or corrupt
• More challenging than domestic firm
• There are 6 main categories to country risk
-Economic Risk
-Transfer Risk
-Exchange Risk
-location or neighborhood risk
-Sovereign risk
The risk that a foreign central bank will alter its foreign-exchange regulations thereby
significantly reducing or completely nulling the value of foreign-exchange contracts.
This is one of the many risks that an investor faces when holding forex contracts.
Additionally an investor is exposed to interest-rate risk, price risk and liquidity risk
amongst others
-Political Risk
• How depend very mush on the nature of the relationship the organization has with the
countries with which it trades

16. Crisis Management
• Threats may originate in the economic, environmental, socio-cultural and political
domains.
• Nowadays, there is growing concerns for terrorism and health threat.
• When these threats are realized, the existence of crisis management mechanism
provides the means to
-mitigate the impact of the loss
-contain the loss
-response and control the situation and effectively
-resolve or recover from the crisis situation
• A crisis situation involves:
-a threat to resources and people
-a loss of control
-visible and/or invisible effect on people, resources and organizations

17. Example of CRISIS
• The terrorist attacks of September 11 2011, resulting in the
loss of lives, the destruction of property and the failure of
companies left without physical offices, resources, employees
or stock.
• Some others related with the security of client data or the
image of a company that fails to deliver on promise, while
others attack the health and well-being of both employees
and clients, and even the very existence of a company or
organization