Nature of risk management ppt

Risk management is the process of identifying, assessing and controlling threats to an organization's capital and earnings. These threats, or risks, could stem from a wide variety of sources, including financial uncertainty, legal liabilities, strategic management errors, accidents and natural disasters. IT security threats and data-related risks, and the risk management strategies to alleviate them, have become a top priority for digitized companies.

As a result, a risk management plan increasingly includes companies' processes for identifying and controlling threats to its digital assets, including proprietary corporate data, a customer's personally identifiable information PII and intellectual property.

Every business and organization faces the risk of unexpected, harmful events that can cost the company money or cause it to permanently close. Risk management allows organizations to attempt to prepare for the unexpected by minimizing risks and extra costs before they happen.

You forgot to provide an Email Address. This email address is already registered. Please login. You have exceeded the maximum character limit. Please provide a Corporate E-mail Address. Please check the box if you want to proceed. By implementing a risk management plan and considering the various potential risks or events before they occur, an organization can save money and protect their future.

This is because a robust risk management plan will help a company establish procedures to avoid potential threats, minimize their impact should they occur and cope with the results.

This ability to understand and control risk enables organizations to be more confident in their business decisions.

Furthermore, strong corporate governance principles that focus specifically on risk management can help a company reach their goals. The importance of combining risk management with patient safety has also been revealed.

In most hospitals and organizations, the risk management and patient safety departments are separated; they incorporate different leadership, goals and scope. However, some hospitals are recognizing that the ability to provide safe, high-quality patient care is necessary to the protection of financial assets and, as a result, should be incorporated with risk management.

VMPS focuses on continuously improving the patient safety system by increasing transparency in risk mitigation, disclosure and reporting. Since implementing this new system, Virginia Mason has experienced a significant reduction in hospital professional premiums and a large increase in the reporting culture.

All risk management plans follow the same steps that combine to make up the overall risk management process:. After the company's specific risks are identified and the risk management process has been implemented, there are several different strategies companies can take in regard to different types of risk:.

While risk management can be an extremely beneficial practice for organizations, its limitations should also be considered. Many risk analysis techniques -- such as creating a model or simulation -- require gathering large amounts of data. This extensive data collection can be expensive and is not guaranteed to be reliable. Furthermore, the use of data in decision making processes may have poor outcomes if simple indicators are used to reflect the much more complex realities of the situation.Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising.

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Nature of Risk Management

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nature of risk management ppt

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Module 2: Risk Assessment Principles

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Risk management

Are you sure you want to Yes No. My professor asked me to write a research paper based on a field I have no idea about. My research skills are also very poor. I chose a writer who matched my writing style and fulfilled every requirement I proposed.

I turned my paper in and I actually got a good grade. Good luck!The number of people living in earthquake zones is rising year on year, making the mitigation of seismic risk more important than ever. Only two cheers? The GEM project addresses a need: around the world most seismic-safety workers must cobble together information from a host of sources to work out which locations are the most dangerous.

In countries such as Indonesia and Peru, access to seismic information is limited. The digital platform, global databases and suite of software tools offered by GEM will make it much easier for hazard analysts and emergency planners to assess risk.

But that is only the start. Hazard assessment is a specialist trade and open to misinterpretation. Feed in a different set of historical quakes or tweak the parameters, and the maps change. Such difficulties are, rightly, hotly debated in the earthquake-hazard community, and better methods may emerge as a result of bigger studies made possible by GEM. Conveying uncertainties will be essential. But disagreement does not diminish risk. A worldwide network such as GEM could be a conduit.

Its standard tools might bring some sanity to seismic-risk analyses in countries such as Italy, where researchers are cowed, and in Greece, where investment is being diverted away from safety to dubious studies of quake prediction. To be useful, the data should be as comprehensive as possible. Governments and universities worldwide should embrace transparency and publish and pool their seismic, planning and socio-economic data within GEM.

Translation of the results into action should be a priority. In addition to stacking its boardroom with more managers as its membership grows, GEM should extend its training of scientists and practitioners to spread knowledge of GEM and seismic-risk modelling on the ground, where it matters most. Fellowships for students and postdocs to work with GEM, as well as the recruitment and instruction of more trainers, would be good steps.

Once the inevitable happens and a major earthquake strikes, GEM should learn from it. Given the large sums of money invested, there needs to be a rigorous assessment process by GEM and independent social scientists after five years or so.When we think of large risks, we often think in terms of natural hazards such as hurricanes, earthquakes, or tornados.

nature of risk management ppt

Perhaps man-made disasters come to mind—such as the terrorist attacks that occurred in the United States on September 11, We typically have overlooked financial crises, such as the credit crisis of However, these types of man-made disasters have the potential to devastate the global marketplace. Losses in multiple trillions of dollars and in much human suffering and insecurity are already being totaled as the U.

The financial markets are collapsing as never before seen. Many observers consider this credit crunch, brought on by subprime mortgage lending and deregulation of the credit industry, to be the worst global financial calamity ever.

Its unprecedented worldwide consequences have hit country after country—in many cases even harder than they hit the United States. David J. The initial thought that the trouble was more a U. Now everyone realizes they are in this global mess together. Reflecting that shared fate, Asian and European leaders gathered Saturday in Beijing to brainstorm ahead of a Nov. We can attribute the collapse to financially risky behavior of a magnitude never before experienced. Its implications dwarf any other disastrous events.

The U. This crisis started with a lack of improperly underwritten mortgages and excessive debt. Companies depend on loans and lines of credit to conduct their routine business. If such credit lines dry up, production slows down and brings the global economy to the brink of deep recession—or even depression.

The snowballing effect of this failure to manage the risk associated with providing mortgage loans to unqualified home buyers has been profound, indeed.

The world is in a global crisis due to the prevailing in action by companies and regulators who ignored and thereby increased some of the major risks associated with mortgage defaults.

When the stock markets were going up and homeowners were paying their mortgages, everything looked fine and profit opportunities abounded. When interest rates rose and home prices declined, mortgage defaults became more common. This caused the expected bundled mortgage-backed securities to fail. When the mortgages failed because of greater risk taking on Wall Street, the entire house of cards collapsed.

Additional financial instruments called credit derivatives In essence, a credit derivative is a financial instrument issued by one firm, which guarantees payment for contracts of another party. The guarantees are provided under a second contract. Should the issuer of the second contract not perform—for example, by defaulting or going bankrupt—the second contract goes into effect.

When the mortgages defaulted, the supposed guarantor did not have enough money to pay their contract obligations. This caused others who were counting on the payment to default as well on other obligations. This snowball effect then caused others to default, and so forth. It became a chain reaction that generated a global financial market collapse. This lack of risk management cannot be blamed on lack of warning of the risk alone. Regulators and firms were warned to adhere to risk management procedures.

Lehman Brothers represented the largest bankruptcy in history, which meant that the U. We can lay all of this at the feet of the investment banking industry and their inadequate risk recognition and management.Risk management aims at controlling the risk exposure of a firm. It is a rational approach towards controlling the Pure Risk to which an organization or an individual is exposed to.

Risk management function can be groups with other management function such as Financial Management, Human Resource Management, etc An overview of different risks will help us to understand the nature of risk management.

Organization and individual are exposed to a wide array of risk in their day to day operations, such as: Fire risk Risk of theft Loss of customer Delay in delivery of raw materials. Breakdown of machinery Accident Bad debts Change in industrial policy whenever the government changes Changes in financial market Changes in taxation etc.

The perspective of risk management varies from one individual to another individual. Organization have their own views on risk. Many scholars and practitioners agree that risk management is an evolving science while a distinct minority feels that it is going to disappear in the years to come.

In between there are many views on the nature of risk management. Risk management includes both risks: pure and speculative, which are insurable and uninsurable in nature, whereas the scope of insurance management is limited only to those activities which can be insured. Moreover philosophically also these two are unique in their point of view.

risk management

Insurance management uses methods which may differ from risk management such as preventing occurrence of loss or retaining the loss. Usually, an insurance manager of a company underwrites policies to cover the underlying risk. But an insurance company while assuming risk, analyzes it from different point of view; like, When considering deduction, the extent of saving made by the insurance company and the extent to which that saving will meet the risk.

When considering loss prevention measures, the extent to which the loss prevention measures reduce insurance cost. Thus the emphasis of the risk manager is to identify those risks which can be retained. As the cost of risk manager takes up insurance when all other options are exhausted. Risk is insured only in unavoidable circumstances.

The risk manager has to justify the need for insurance before undertaking the policy. Though risk management is different from insurance management; its scope is narrow as it does not cover the business risk.

This includes the expectations that the organization has from the risk manager. The efficiency of the risk management may be seriously hampered if its objectives are not clearly specified. The clear delineation of the risk management process as a holistic approach rather than isolated individual problems to be dealt with.

In order to ascertain the risk management objective of the organization, it is very important to link the priorities, goals and objective of risk management with that of the organization as it is essential for the risk management program to protect the organization from various exposures. Moreover the organization would like to ensure safety for its workers. The would like to control its cost, have good understanding and terms with its shareholder suppliers, dealers, customer, retailers, etc and fulfill its social obligation.

Thus, there are varies objectives of risk management, which the organization would like to meet. These objectives may be classified into two broad categories. They are: Post loss objectives Pre loss objectives 1. However, the guiding principle of development of objectives for an organization remains the same: to save the organization from the perceived risks.

Usually, the organization develops a risk management policy which lays down the objectives of risk management. The ultimate responsibility of the welfare of the organization rests with the top management because of which they lay down the important policy decisions. However, the risk manager can provide valuable suggestions which will help the top management in arriving at well developed policies.

Therefore, the risk manager has to analyze varies system of the organization in detail and identify the maximum possible risk expose of the firm.

The risk manager usually undertakes a systematic study of identifying the potential risks. A few other methods used in general are check list, questionnaire, flowchart, financial statement analysis and close examination of company operations. It is important for the risk managers to have clear understanding of the various processes of the organization and orient their thinking towards these processes. They should have in-depth knowledge about the aims and objectives of organization as well as specific characteristic of the organization which distinguishes it from others.Not using all the available pixels will render a lower quality image.

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nature of risk management ppt