Strategic/Franchise Risk Legal/Compliance Risk Staffing/Organization Risk Credit Risk Market Risk Operational/Systems/Technology Risk Environmental Risk Sovereign Risk Financial/Documentation Reporting Risk Liquidity Risk

1. 1. Risk-Terminology, RM
By-Chetan sharma(2012-22)
And Harpreet singh(2012-20)

2.  Based on
“Uncertainty”
 Uncertainty
concerning the
occurrence of a loss
 Based on “Expected
Value”
 Deviation from
expectation

3. Perils
 (Immediate) Causes of loss
 Natural perils
 Acts of God
 Human perils
 Human acts, errors, and omissions, whether
intentional or unintentional, causing a loss
 Economic perils
 Economic events or phenomenon causing a loss
 Insurable and Uninsurable perils

4. Hazard
 A condition that creates or
increases the chance of losses, their
severity, or both.
 Physical hazard
 Moral hazard
 Morale hazard
 Legal hazard

5. Types of Pure Risk
 Personal Risk
 Property Risk
 Direct Loss
 Indirect Loss
 Liability Risk

6. Risk Management
 Traditional risk management?
 Enterprise risk
 (Major) risks faced by an organization (or firm)
 Enterprise risk management
 The process (or discipline) by which an
organization assess, controls, exploits, finances,
and monitors risks from all sources for the
purpose of minimizing the effects of risks on
organization’s value.

7. 7
Key ERM Risk Terms
 Strategic/Franchise Risk
 Legal/Compliance Risk
 Staffing/Organization Risk
 Credit Risk
 Market Risk
 Operational/Systems/Technology Risk
 Environmental Risk
 Sovereign Risk
 Financial/Documentation Reporting Risk
 Liquidity Risk

8. 8
Key Implementation
Requirements
1. Provide leadership and “set the tone from the top”
2. Allocate resources for enterprise risk management
3. Establish vision and overall plan
4. Set milestones and individual accountabilities
5. Establish risk measures and early warning indicators
6. Integrate ERM into business planning and operations

9. 9
Example: Energy Industry
Insurance
Credit
Market
Insurance
Credit
Operations
Insurance
Business
Organizational
Insurance
Financial
Risk Management
Enterprise
Risk Management
1970s 1980s 1990s
(Deregulation)