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RISK MANAGEMENT : JOURNEY OR DESTINATION ?

RISK MANAGEMENT : JOURNEY OR DESTINATION ? . What is Risk?. “ Any uncertain event that could significantly enhance or impede a Company’s ability to achieve it’s current or future objectives, including failure to capitalize on opportunities……”. The possibility of good things not happening

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RISK MANAGEMENT : JOURNEY OR DESTINATION ?

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  1. RISK MANAGEMENT :JOURNEY OR DESTINATION ?

  2. What is Risk? “Any uncertain event that could significantly enhance or impede a Company’s ability to achieve it’s current or future objectives, including failure to capitalize on opportunities……” The possibility of good things not happening (risk as opportunity) The potential that actual events will not equal anticipated outcomes (risk as uncertainty) New Technologies New markets Exchange rate fluctuations Coal price fluctuation The threat of bad things (risk as hazard) Flood or Fire

  3. Risk Management • Risk Management is the process of defining all the risks that an organization faces • Building a framework to not only monitor and mitigate those risks but to use risk management to increase shareholder value • The point of risk management is not to eliminate it; that would eliminate reward • The point is to manage it………

  4. Shareholder value

  5. Need for Risk management • Uncertainty in Enterprise • Growing Complexity in Business Environment • Statutory Obligations • Contractual Obligations • Social Obligations • High Profile Corporate Failures

  6. Current Approach to Risk Management • Traditional approach—Silo approach • Physical risks • Property risks • Currency risks • Interest rate risks • Commodity risks • Credit risks • Transaction orientation

  7. The Universe of Risk

  8. Traditional Risks V New Risks • Traditional Risks • Easily describable and readily assessable in monetary terms • Amenable to classic Risk Management • New Risks • Identifiable to a limited extent and not easily assessable (if at all) • Require skills of Extended Risk Management

  9. Why Enterprise Wide Risk Management • Segmented approach leaves uncovered gaps which EWRM can plug • EWRM could result in cost optimization • Leads to closer integration of operations with the mission of the Company. • Is a well defined and integrated process.

  10. The new perspective on risk management “Good risk management should enable options while protecting value already created.”

  11. Risk Management Process Set Objectives Objectives are set at the strategic level, establishing a basis for operations, reporting and compliance objectives Identify the most relevant risks, based on the entity/SBU/Process objectives and situation Evaluate the level of risks, based on probability and the significance of their potential impact Decide appropriate management action to respond to assessed risk Monitor the implementation and success of risk mitigation action plan. Report to the appropriate level to meet reporting requirements Identify Risks Assess Risks Control/Act Monitor/Report

  12. Process of Risk Management Risk Definition Risk Valuation Risk Mitigation

  13. Process of Risk Management • Risk Identification • Risk Measurement • Risk Control • Risk Transfer • Risk Financing • Risk Retention

  14. Insurable Risks • PEOPLE RISKS • Loss to Employees • ILL Health and accident • Death • Overseas travel • LIABILITIES RISKS • Loss from Operations • Product liabilities • Public liability • Directors & Officers liabilities • Errors & Omissions liabilities • PROPERTY RISKS • Damage to Physical Assets • Acts of God • Accidents • Break down FINANCIAL RISKS • Monetary Loss from • Theft and Burglary • Business interruption • Bad credit

  15. Emerging issues in Insurance • De-tariffing • A R T • Captives • Derivatives

  16. Stakeholders Expectations • Stakeholders • Customers • Shareholders • Employees • Society • Government • Suppliers • Financiers

  17. Understanding Expectations • Establish what shareholders value about the company • Identify the risks around key value drivers • Determine the preferred treatment for the risks • Communicate risk treatment to the shareholders

  18. Elements of Risk ManagementArchitecture • Senior Management/Board commitment • Integration with Business Process • Risk Management Structure • Risk Management Reporting • Change Management responsibility • Communication and training • Reinforcement through HR mechanisms • Monitoring of risk management process

  19. Risk Management Roles & Responsibilities

  20. Treatments of Risks

  21. Risk management is a Continuous Journey

  22. THANKS FOR YOUR TIME AND ATTENTION

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