The document discusses the evolution of risk management from early humans creating tools for protection and hunting, to modern organizations systematically managing risks. It describes the risk management process as identifying potential risks, evaluating their frequency and severity, selecting techniques to mitigate risks like retention, transfer, or avoidance, and then monitoring the process. Key aspects of risk management for organizations are identifying various property, liability, and human risks, analyzing their financial impact, and using tools like risk controls, financing, and cost-benefit analysis to select the best risk management strategies.

1. RISK MANAGEMENT PROCESS
AND ADMINISTRATION
Evolution of Risk Management
How Premative People Dealth With Risk
 Create tools a weapon
 Create fencing for protection
 Stone spear as a tool for hunting foods
for survival’
 Banded together
 Capture animal for food reservation
2

2.  Risk Management is now considered
crucial to the survival of organization
 Career in risk management is well
sought out for.
 Civilization and development beside
bringing progress to us brought with
it new risks.

3.  New form of diseases HINI,
AIDS and manmade risks such
as hacking of computer system,
the Enron Case, Sub-prima case
in the USA, leaving us with no
choice but learn to cope and
manage these risks with the
best possible options

4.  Organization manage risks to
minimize risks that threaten its
assets and earnings.
 Many organization recognize the
significance of the risk management
process and have given it top priority
in their operations.
 Risk management has become part of
the strategic management of an
organization

5.  Risk management is no longer “lip
service” or merely to adhere to legal
requirement.
 Risk management is an important
agenda and it involves serious
decision making by the top
management.

6. What is Risk Management?
“ A systematic process of identifying,
evaluating, analyzing loss exposures
and selecting the most effective
technique to mitigate these loss
exposures”.
“Risk management is a scientific
approach to the problem of dealing
with the pure risks facing individuals
and organizations”.

7. DUTIES Of A RISK MANAGER
 Assist in Developing Risk Management Policy
 Risk Identification and Measurement
 Selecting Risk Financing Alternatives
 Negotiate Insurance Coverage
 Managing Claims
 Internal Administration
 Communicating with Other Managers
 Accounting
 Administer Risk Functions
 Loss Prevention
 Managing Employee Benefits
 Providing safety related training programs

8. RISK MANAGEMENT PROCESS
3. SELECTING AND
IMPLEMENTING THE
RISK MANAGEMENT
DECISIONS
4.MONITORI
NG AND
REVIEWING
THE RISK
MANAGEMENT
PROCESS
2.EVALUATING
AND ANALYZING
THE FREQUENCY
AND SEVERITY
OF RISK
1.IDENTIFYING
POTENTIAL AND
EXISTING RISK

9. What is Risk Management?
“ A systematic process of identifying,
evaluating, analyzing loss exposures
and selecting the most effective
technique to mitigate these loss
exposures”.
“Risk management is a scientific
approach to the problem of dealing
with the pure risks facing individuals
and organizations”.

10. 1. IDENTIFYING EXISTING AND
POTENTIAL RISK
 PROPERTY RISKS---BUILDING,
OFFICE EQUIPMENT, MACHINERY,
CONFIDENTIAL RECORDS,
VEHICLES.
 LIABILITY RISKS---PUBLIC,
PRODUCT, EMPLOYER, ETC
 HUMAN RESOURCE OR
PERSONAL RISKS---DEATH,
INJURIES, RETIREMENT, SICKNESS

11. THE TOOLS FOR IDENTIFYING
RISKS
 FINANCIAL STATEMENT---INCOME
STATEMENTS, STATEMENT OF SOURCES
AND USES OF FUNDS, REVENUE , PROFIT
AND LOSS STATEMENT.
 PHYSICAL INSPECTIONS---SITE AND
WORKPLACE INSPECTIONS
 RISK ANALYSIS
QUESTIONAIRES---A STANDARD SET
OF QUESTIONAIRES CAN BE USED IN RISK
MANAGEMENT SURVEY.

12.  HISTORICAL LOSS DATA---REVIEWING
THE HOSTORICAL LOSS DATA WOULD
HELP TO IDENTIFY LOSS EXPOSURES
 FLOWCHARTS---KNOWING THE
PROCESS FROM START TO FINAL
PRODUCT.
 INTERVIEW/ DISCUSSINS---GETTING
INTERNAL AND EXTERNAL EXPERT
OPINION TO IDENTIFY LOSS EXPOSURE

13. 2. EVALUATING AND ANALYZING
THE RISKS
EVALUATE AND ANALYZE THE RISKS
IN TERMS OF FINANCIAL LOSS:
 SEVERITY (MAXIMUM PROBABLE
LOSS)
 FREQUENCY (LIKELIHOOD OF
OCCURANCE)

14. 3. SELECTING AND IMPLEMENTING APPROPRIATE
LOSS PREVENTION AND REDUCTION TECHNIQUES
 RETENTION => IF FREQUENCY AND SEVERITY
IS LOW.
 RETENTION=> IF SEVERITY LOW AND
FREQUENCY HIGH
 TRANSFER =>FREQUENCY LOW AND SEVERITY
HIGH
 AVOIDANCE AND REDUCTION
=>SEVERITY AND FREQUENCY OF LOSS IS HIGH
TREATMENT OF RISKS AND MANAGEMENT
DECISION

15. RISK MATRIX
HIGH
SEVERITY
LOW
SEVERITY
HIGH
FREQUENCY
AVOIDANCE
AND
REDUCTION
RETENTION
AND
REDUCTION
LOW
FREQUENCY
TRANSFER RETENTION

16. 4. MONITORING AND REVIEWING
THE RISK MANAGEMENT PROCESS
 MONITOR TO ENSURE ALL
PARTIES IN THE ORGANIZATION
COMPLY WITH THE PROGRAM
 TO ENSURE STANDARD SET ARE
MET
 MEASURE PERFORMANCE
AGAINST STANDARDS
 TO DETECT PAST MISTAKES
 TAKE CORRECTIVE ACTIONS

17. TOOLS OF RISK MANAGEMENT
1.RISK CONTROL
 RISK AVOIDANCE---NOT TO ACQUIRE
OR TO ABANDON THE RISK
 RISK PREVENTION--- EFFORTS
UNDERTAKEN TO REDUCE THE
LIKELIHOOD OR FREQUENCY OF THE
RISK HAPENNING
 RISK REDUCTION---EFFORT TO
REDUCE OR MINIMIZE

18. 2. RISK FINANCING
 RISK RETENTION---WHEN
ORGANIZATION DECIDE TO RETAIN
THE WHOLE OR PARTIAL RISK
 EG.1. PUT ASIDE CERTAIN AMOUNT
OF WAGES TO PAY FOR HOSPITAL
BILL.
 EG.2. CAPTIVE INSURER IS AN
INSURANCE SET UP BY ITS PARANTS
COMPANY TO INSURE THE RISK OF
THE PARENT COMPANY.

19.  RISK TRANSFER---INVOLVE TRANSFERRING
THE RISK TO ANOTHER PARTY.
 HEDGING---IS A RISK TRANSFER
MECHANISM IN FINANCIAL RISK
MANAGEMENT WHERE UNCERTAINTY IN THE
VALUE OF THE ASSETS DUE TO
FLUCTUATIONS IN RATES ARE OFFSET BY
ENTERING INTO FUTURE CONTRACT
(BUY/SELL THE ASSET) AT A FIXED VALUE
OR AT A KNOWN RATE.

20. RISK MANAGEMENT COSTS AND
BENEFITS
 IMPORTANT TO ASSESS THE COST OF RISK AND
MEASURE IT AGAINST OPERATING COST AND
RISK MANAGEMENT DECIIONS.
 ECONOMICALLY FEASIBLE
 BENEFIT OUTWEIGHT THE COSTS
 EVALUATE THE SIZE OF LOSS SHOULD THE LOSS
OCCUR
 WHEN ALL THE RELEVANT INFORMATION IS
OBTAINED THEN CHOOSE THE THE BEST RISK
MANAGEMENT TECHNIQUE TO BE ADOPTED.