Risk Management
Introduction It provide insight into a world of risk management. We all face risks in our everyday of lives. Risk arise from personal activities and range from those associated with travel through to ones associated with personal financial decisions. There are considerable risks present in domestic component of our lives and these include fire risks in our homes and financial risks associated with home ownership.
Nature of Risk- Recent events in the world have brought risk into higher profile. Terrorism, extreme weather events, global financial crisis represent the extreme risks that are facing society and commerce. With our personal and domestic lives many of the responses to risk are automatic. Our ways of avoiding fire and road traffic accidents are based on well-based established and automatic responses. Fire and accidents are types of risks that can only have negative outcomes and they often referred to as hazard risks. In our personal lives, buying insurance for car is usually a legal requirement, where as buying insurance for house is often not, but it is good risk management and very sensible.
6. Servicing of Vehicle (control risk) 7 6. Servicing of Vehicle (control risk) 7.Investing a money in anticipation you will make profit from that investment. Likewise placing a bet or gambling on the outcome of the sporting event is undertaken the anticipation of receiving positive payback. 8.People participate out of our choice in motor sports and other potentially dangerous leisure activities. In these circumstances, the return may not be financial but can be measured in terms of pride, self-esteem, or peer group respect. This is opportunity risk.
Risk Management- Organization faces a very wide range of risks that can impact the outcome of their operations. Objective to achieve stated mission of organization. Risk Management Terminology. Many organizations manages this common language and common understanding of risk management processes and protocols internally. It is usually the case that within the business sector, and sometimes within individual organizations, the development of common language of risk can be very challenging.
Benefits of Risk Management- There are range of benefits arising from successful implementation of risk management. These benefits are compliance, assurance, decisions and efficiency/effectiveness and efficacy. The benefit from the risk management is to enhance the efficiency of the operations within the organization. Risk management should provide more than assistance with the efficiency of operations within the organization. It should also help ensure that the business processes are effective and that the selected strategy is efficacious.
Features of Risk Management- Failure to adequately manage the risk by an organization can be caused by inadequate risk- recognition, insufficient analysis of significant risks and failure to identify suitable risk response activities. Failure to set a risk management strategy and communicate that strategy and the associated responsibilities may result in inadequate management of risks. The consequences of failure to adequately manage risk can be disastrous and results in inefficient operations, projects that can not be completed on time and the strategies that are not delivered or were incorrect in first place. In order to successful, the risk management initiative must be proportionate, aligned, comprehensive, embedded and dynamic (PACED)
Future for Risk Management As the global financial crisis enfolded, there is an increasing tendency for news report to indicate that the risk is bad and the risk management is failed. In reality neither these two statement are correct. There should be carefully planned implementation of the risk management process. As well as design and successful embedding of a suitable and sufficient risk management framework.
Global Financial Crisis The actions that would to help to avoid a repeat of the global financial crisis. Many of the organization lack a common risk management framework across the enterprise. His has many elements, each of which is required to help avoid similar disaster s in future: First , there should be a common processes, terminology and practices for managing risks of all kinds. Second, it is essential that risk tolerance should be fully understood, communicated and monitored across the enterprise. Third, risk management practices should be incorporated into the all key businesses processes and decisions.
4. And fourth, the management should make risk- related decisions using dedicated high quality risk information.
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