RISK

MANAGEMEN
T
Presented by: Jude Airiz
Legaspi

?
k
s
i
R
s
i
t
a
Wh

RISK
is often used to mean uncertainty, creates
both problems and opportunities for
businesses and individuals in nearly every
walk of life.
Is anything that may affect the
achievement of an organizations
objectives
It is measured in terms of
consequences and likelihood.

Classification of Risks
Pure risk vs. Speculative risk
Statics vs. Dynamics
Subjective vs. Objective

Pure risk vs. Speculative risk

Pure Risk - exists when there is
uncertainty as to whether loss will
occur.
Speculative Risk exists when
there is uncertainty about an
event could produce either a
profit or a loss.

Statics vs. Dynamics

Statics risks are present in an

unchanging, stable society.
Dynamic risks are
produced by changes in
society.

Subjective vs. Objective

Subjective Risk refers to the
mental state of an individual.
Objective Risk (measurable); is
the probable variation from
expected experience.

3 Types of Risks
1. Economic Risks
- occur from changes in overall business
conditions
It

includes :
Amount or type of competitors
Changing consumer lifestyle
Population changes
Government regulations
Inflation
Recession

2. Natural Risks
may be coming from natural
disasters and calamities.
It includes:

Floods
Tornadoes
Hurricanes
Fires
Drought
Earthquakes

3. Human Risks
are caused by human mistakes, as
well as unpredictability of customers,
employees or the work environment.
It Includes:

Theft
Injury/accident
Employee error
Negligence
Incompetence

a
n
a
M
k
s
i
R
s
i
t
Wh a

?
t
n
e
gam

Risk management is the

process used to systematically
manage exposure to pure risk

Integrated Risk Management

is an emerging view that recognizes
the importance of risk, regardless its
source, in affecting a firms ability to
realize its strategic objectives.
Elements:
Develop Risk Profile
Establish an IRM function
Practicing IRM
Ensuring Continuous Risk
Management Learning

Enterprise risk management expands the process to

include not just risks associated with accidental losses,
but also financial, strategic, operational, and other risks.

DIFFERENCES AND SIMILARITIES

Enterprise-wide

Organiccentric
Success is
defined as
implementa
ti-on over
the entire
organizatio
n

Integrated

Formal Process
Consistent and
systematic
Includes projects
& programs
Is embedded in
key process such
as strategic
planning
budgeting, project
planning etc
Adds value to
decision making

Take a
system
focus
May
actually
create risks
for
individual
organizatio
ns

Objectives of Risk Management

Provide a systematic approach to early
identification and management of risks
Provide consistent risk assessment
criteria
Make available accurate and concise
risk information
Adopt risk management strategies
Monitor and review risk levels

Benefits of Risk Management

Increase the likelihood of us achieving our
strategic and business objectives
Encourage a high standard of accountability at
all levels of organzation
Support more effective decision making through
better understanding of risk exposure
Create an environment that enables us to deliver
timely services and meet performance
objectives
Safeguard our assests
Meet the compliance and governance
requirements

K
S
I
R
E
H
T
N
S
I
S
S
E
C
O
R
S T EP
P
T
N
E
M
E
G
A
N
MA

Identify
Issues

Risk identification is a key step in the

risk management process to ensure
a complete list of risks is identified
How can risks be
Incident report forms
identified?

Self-Inspection Checklists
Observation & consultation
Regular maintenance checks
Specialists assisting with
specific issues in the
workplace
Knowledge sharing

Identify
the risk.

Identify
Issues

Assessing
key risk
areas
Measuring
Likelihood
and
Impact

Ranking
Risks

Risk priority
The risk priority scale determines the
nature of the risk and the action
required.

Identify
Issues

Assessing
key risk
areas
Measuring
Likelihood
and
Impact

Ranking
Risks

Selectin
ga
Developin
strategy g Options

Setting
Desired
Results

Potential risk options and strategies

Avoidance (eliminate, withdraw
from or not become involved)

 Avoidance
eliminate, withdraw from or not
become involved
change plans to circumvent the
problem
anticipation of the problem

Potential risk options and strategies

Avoidance (eliminate, withdraw
from or not become involved)
Reduction (optimize mitigate)

 Reduction
optimize and mitigate
reduces impact or
likelihood (or both) through
intermediate steps;
examples
Screening and Training
Employees
Providing Safe
Conditions
Providing Safety
Instructions
Preventing External
Theft

Potential risk options and strategies

Avoidance (eliminate, withdraw
from or not become involved)
Reduction (optimize mitigate)
Retention (accept and budget)

 Retention
Accept and Budget; Take the chance
of negative impact,
eventuallybudgetthe cost (e.g. via a
contingency budget line);
Business assumes the loss
responsibility into the upkeep of the
company.

Potential risk options and strategies

Avoidance (eliminate, withdraw
from or not become involved)
Reduction (optimize mitigate)
Retention (accept and budget)
Sharing (transfer outsource or insure)

 Sharing
transfer risk - outsource risk (or a
portion of the risk -Share risk) to
third party/ies that can manage the
outcome. This is done e.g. financially
through insurance contracts or
hedging transactions, or operationally
through outsourcing an activity.

 3 common Risk Transfer

1. Insurance
Insurance policy contract that covers
a business with a specific type of
insurance reducing risks
Business liability insurance
protects a business against damages
for which it may be legally liable.
Personal liability covers damages by
customer and or employees
Product liability protects damages
by customer and/or employees.

 3 common Risk Transfer

2. Product/service warranties
warranties are simply promises made
by the seller or manufacturer with
respect to the performance and
quality of a product and protection
against loss.

3. Tranferee business ownership

The total amount of risk the
business must handle in part of
business ownership.

Hierarchy of Controls

Identify
Issues

Assessing
key risk
areas

Monitoring,
Evaluating,
&Adjusting

Implementing
a
Strategy
Selectin
ga
Developin
strategy g Options

Measuring
Likelihood
and
Impact

Ranking
Risks
Setting
Desired
Results