RiskManagement_Reviewer1-1-2.pdf

MNGT 3109: RISK MANAGEMENT RISK MANAGEMENT PROCESS IDENTIFY the risk – first step of RM is to identify risks that business MODULE 1...

MNGT 3109: RISK MANAGEMENT RISK MANAGEMENT PROCESS IDENTIFY the risk – first step of RM is to identify risks that business MODULE 1 discovered on its operation. RISK Types of risks: (1) legal risks, (2) Present in every business form, environmental risks, (3) market risks, (4) from store to large manufacturer regulatory risks…… Common challenges with human, It is important to identify as many risks as claims, engine in general possible. (1) fire can damage buildings, ANALYZE the risk – once the (2) someone could slip and fall, team identifies potential problems, time to go little deeper. (3) vehicle accidents often occur, and Team will examine the probability and (4) losses can occur is the result of effective fallout of each risk to choose where to focus product. first. TREAT the risk – after analyzing, “If you risk nothing, you gain nothing.” develop treatment plan. ~ Bear Grylls You can’t expect every risks, you should set up the previous steps for the success of RM process. GOOD SENSE OF RISK Talking with the highest priority risk. MANAGEMENT IN DIFFERENT Either solving or reducing it, so it will not FORMS be longer a risk. ❖ Investors can figure out Effectively treating the risk means using opportunities, trade-offs, and cost team’s resource properly without associated with different investment hampering the project. approaches. ❖ Risk management occurs when Expect potential risks for more proactive manager or investor analyzes and rather than reactive approach for more quantify potential losses in efficient treatment. investment, and takes appropriate MONITOR the risk – transparent action; fund’s investment targets communication among your team and risk tolerance. and stakeholders is fruitful for ❖ In financial world, RM approaches ongoing monitoring potential risks. identification, analysis, and acceptance or mitigation of Continuously monitored to make sure the uncertainty in investment decisions mitigation plan is working RM. To keep aware if a risk becomes greater threat. TYPE OF RISKS STRATEGIC ENTERPRISE RISK MANAGEMENT ▪ Demand shortfall ❖ Is a business strategy that includes ▪ Customer retention methods and processes that ▪ Integration problems organization use to identify, assess, ▪ Pricing pressure and manage risks that could ▪ Regulation interfere with company’s operations ▪ R&D and objectives. ▪ Industry or sector shutdown ❖ Allow managers to shape the ▪ JV or partner losses overall risk position by mandating certain business segments engage OPERATIONAL with or disengage from particular ▪ Cost overrun activities. ▪ Operational cost ▪ Poor capacity management ▪ Supply chain issues How to implement ERM practices ▪ Employee issues; including fraud - Define risk philosophy. (before ▪ Bribery and corruption implementing practices, a company ▪ Regulation must identify how it feels about risk ▪ Commodity prices and what its strategy around risk it HAZARD will be) - Create action plans ▪ Macroeconomics - Be creative ▪ Political issues - Communicate priorities ▪ Legal issues - Assign responsibilities ▪ Terrorism - Maintain flexibility ▪ Natural disasters - Leverage technology. (seek out FINANCIAL ways to employ technologies) - Continually monitor ▪ Debt and interest rate ▪ Poor financial management ▪ Asset losses BUSINESS AND FINANCIAL RISK ▪ Goodwill and amortization ▪ Accounting problems IMPACT AND IMPOTANCE OF RISK “The biggest risk is not taking any risk” MANAGEMENT ~ Robert Kiyosaki 1. It helps calculate uncertainties 2. Prepares organization for unexpected 3. Enable to minimize losses 4. Maximize opportunities