TMHM 002 Risk Management (Lesson 2) PDF

TMHM 002: RISK MANAGEMENT AS APPLIED TO SAFETY, SECURITY, AND SANITATION LESSON 2: SOURCES OF RISK PROF. OLIVIA TABUCOL 1ST SEMESTER | A.Y. 2425 | MIDTERMS | BSHM 1-3D 4. CREDIT RISK...

TMHM 002: RISK MANAGEMENT AS APPLIED TO SAFETY, SECURITY, AND SANITATION LESSON 2: SOURCES OF RISK PROF. OLIVIA TABUCOL 1ST SEMESTER | A.Y. 2425 | MIDTERMS | BSHM 1-3D 4. CREDIT RISK 2.1 SOURCES OF RISK - According to Principles for the Management Risk can come from different sources like the of Credit Risk, it is the potential that a bank following: borrower or counterparty will fail to meet its 1. Uncertainty in financial markets obligations following agreed terms. It is a 2. Threats from project failures (at any phase critical component of a comprehensive in design, development, production, or approach to risk management and essential sustainment life-cycles. to the long-term success of any banking 3. Legal liabilities organizations. 4. Credit risk 5. Accidents 5. ACCIDENTS 6. Natural causes and disasters - Similar to risk, accidents are reactive while 7. Deliberate attack from an adversary risks are preventive. 8. Events of uncertain or unpredictable - Accident management is necessary to root-cause reduce the costs pertinent to the accident, 1. UNCERTAINTY IN THE FINANCIAL to with damage to property, costs of rental, MARKET maximization of subrogation recovery. - Managers must be vigilant enough in 6. ACCIDENTS DUE TO FORTUITOUS determining those uncertainties that could EVENTS OR ACTS OF GOD give more impact in the entirety of his - It is beyond the contemplation of man. The business. causes are not within the bounds of man. 2. THREATS FROM PROJECT FAILURES Listed below are some of the natural phenomena identified around the world - According to Taylor Jr. (2014), the 1. Earthquakes compelling business development required 2. Volcanic eruption taking on calculated risk. Throughout the 3. Flood whole process of project development, the 4. Landslides managers could direct their teams on the 5. Erosion right actions utilizing establishing the 6. Fire distinction between risks and effects. 7. Storm Consequently, late projects and its failure to 8. Typhoon meet the quality guidelines could produce an adverse impression on the new 7. SECURITY-RELATED ACCIDENTS members. - Accidents that could be attributed to 3. LEGAL LIABILITIES IN TOURISM AND accident and negligence cases like robbery HOSPITALITY INDUSTRY and theft. It could be any of the following; 8. EVENTS OF UNCERTAIN OR Financial loss UNPREDICTABLE ROOT-CAUSE Damage to property The strategies to manage risk typically include; Injury to workers or guests - Transferring the risk to another party - Most people in this industry would like to - Avoiding the risk get rid of any legal responsibility attaching - Reducing the adverse effect or probability to the risks, that’s why they are using risk of risk management as a precautionary measure. - Accepting some or all of the potential or Risk management is a tool to avoid injury to actual consequences of a particular risk guests and employees and to protect their business operations from financial or physical inconveniences. Annotated By: Bacod, Elmar A. PAGE 1  TMHM 002: RISK MANAGEMENT AS APPLIED TO SAFETY, SECURITY, AND SANITATION LESSON 2: SOURCES OF RISK PROF. OLIVIA TABUCOL 1ST SEMESTER | A.Y. 2425 | MIDTERMS | BSHM 1-3D Increasingly Customer 2.2 RISK IDENTIFICATION better informed tastes change 1. The first stage of the methodology includes customers quickly the possible specific causes of business risks are identified in systematic manner, together with its range and possible effects thereof, which an entrepreneur must confront. 2. The proper identification of risk calls for a detailed knowledge of the company, of the market in which it operates, of the legal, social, political, and cultural environment in which it is set. 3. Risk identification must be systematic and begin by identifying the key objectives of success and the threats that could upset the achievement of these objectives. 2.3 PERCEPTION OF THE RISK It is a threat in the system most often used in order to identify it. Managing the risk signifies installing 2.4 CLASSIFICATION OF RISKS control systems that will minimize both the 1. SECTOR likelihood that adverse events will occur as well as the severity of such events. - A risk that external factors independent from the entrepreneur’s management could Defensive nature. The aim is to allocate resources directly or indirectly influence the in order to reduce the likelihood of sustaining achievement of the objectives and adverse impacts. It uses techniques that will strategies to a significant extent. maximize the results but limiting the possible Ex. damages or costs - Regulatory changes - Business fragmentation - Appearance of new markets STRENGTHS WEAKNESSES 2. OPERATIONAL - It is associated with the entrepreneur’s Location of Commercial ability to convert the strategy chosen into establishments fragmentation specific plans, by means of an effective Highly flexible Limited access allocation of resources. cost structure to financing Ex. Proximity to Lack of - Need for advertising effort customers specialized and - Highly staffing costs trained - Lack of operational and financial planning personnel - Tendency towards subcontracting - Tendency towards concentration OPPORTUNITIES THREATS 3. TECHNOLOGY Sector in Regulatory - It measures the exposure to the expansion changes technological risks derived from the need to Specialization in Entry of new undertake heavy investment in order to market niches competitors Annotated By: Bacod, Elmar A. PAGE 2  TMHM 002: RISK MANAGEMENT AS APPLIED TO SAFETY, SECURITY, AND SANITATION LESSON 2: SOURCES OF RISK PROF. OLIVIA TABUCOL 1ST SEMESTER | A.Y. 2425 | MIDTERMS | BSHM 1-3D ensure the feasibility of the business - It refers to the uncertainty associated with project within a specific period of time. effective management and the control of Ex. finances carried out by the entrepreneur, as - Significant investments well as to the effects of external factors - Low level of implementation (availability of credit, exchange rates, - Low level of technological training movements in the interest rates, etc.) 4. COMPETITORS Ex. - Long term financial incapacity - The size, the financial and operational - Exposure to interest rate changes capacity of the agents in a sector - Lack of knowledge of advantageous sources determine the degree of rivalry in that of financing sector and set the rules of the game that - Subsidies any new agent has to consider in order to operate in the marketplace. Ex. 2.5 SOURCES OF IDENTIFYING RISKS - Appearance of new competitors -Those company environments, whether internal or - Intense competition external, that can generate threats of losses or - Specialized competition obstacles for achieving the company’s objectives. 5. SUPPLIERS - A procedure that facilitates the identification of risk is to ask oneself. - It could generate risks for an entrepreneur Pressure by competitors due to variations in the price of raw The employees materials, availability of a variety in the The customers supply for a continuous period of time, the The new technologies degree of concentration of the supplies Changes in the environment which will determine the method of Laws and regulations payment accepted in the sector. Globalization Ex. The operations - Exposure to changes in the price of goods The suppliers - Dispersion in the supply - Non-determination of the quality of the -End of lesson 2 service provide increase in power of negotiation 6. CUSTOMERS - They are the generators of revenues; the risk can stem from changes in their taste and needs, from generating pressures forcing prices down or from lengthening the payment period, among other factors. The value proposal should always be customer-oriented. Ex. - Increase in power of negotiation - Lack of loyalty - Social and demographic changes - Seasonality - Decline in the demand 7. FINANCIAL Annotated By: Bacod, Elmar A. PAGE 3