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RISK MANAGEMENT :
JOURNEY OR DESTINATION ?
What is Risk?
“Any uncertain event that could significantly enhance or impede aCompany’s ability to achieve it’s current or future objectives, including
failure to capitalize on opportunities……”
The possibility of goodthings not happening(risk as opportunity)
The potential that actualevents will not equalanticipated outcomes(risk as uncertainty)
The threat of bad things(risk as hazard)
NewTechnologiesNew markets
Exchange rate fluctuationsCoal price fluctuation
Flood or Fire
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………
Shareholder value
Need for Risk management Uncertainty in Enterprise
Growing Complexity in Business Environment
Statutory Obligations
Contractual Obligations
Social Obligations
High Profile Corporate Failures
Current Approach to Risk Management
Traditional approach—Silo approach Physical risks Property risks Currency risks Interest rate risks Commodity risks Credit risks
Transaction orientation
The Universe of Risk
P R O C E S S
P H Y S IC A L A S S E T S
P E O P LE
L E G A L
O P E R A T IO N S
C A P IT A L S T R U C T U R E
R E P O R T IN G
C R E D IT A N D L IQ U ID IT Y
M A R K E T
F IN A N C IA L
S T A K E H O L D E R S
G O V E R N A N C E
M A R K E T S T R U C T U R E
S T R A T E G IC
IN T E L E C T U A LP R O P E R T Y
IN F O R M A T IO NM A N A G E M E N T
S Y S T E M S
K N O W L E D G E
E N T E R P R IS E
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
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.
The new perspective on risk management
“Good risk management should enable options while protecting value already created.”
Risk Management ProcessObjectives 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
SetObjectives
Identify Risks
Assess Risks
Control/Act
Monitor/Report
Risk Definition Risk Valuation Risk Mitigation
Process of Risk ManagementProcess of Risk Management
Components PricingDefinition of Valuation Model
Valuation process and guidelines
Evaluation of Risks
Risk Transfer Policy
Risk Transfer Procedure
Cost benefit analysis
Documentation of Process
Monitoring mechanism
Administration proceduresBusiness Objectives
Business Process Definitions
Organization Structure
Delegation of Authority and Responsibility Definitions
Internal Controls and Systems Documentation
Risk Definition
Components of Risk
Probability Analysis
Process of Risk Management Risk Identification
Risk Measurement
Risk Control
Risk Transfer
Risk Financing
Risk Retention
PROPERTY RISKS
Damage to Physical Assets Acts of God Accidents Break down
FINANCIAL RISKS
Monetary Loss from Theft and Burglary Business interruption Bad credit
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
Insurable RisksInsurable Risks
Emerging issues in Insurance
De-tariffing
A R T
Captives
Derivatives
Stakeholders Expectations
Stakeholders Customers Shareholders Employees Society Government Suppliers Financiers
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
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
Risk Management Roles & ResponsibilitiesParty Brief Role & Responsibility
Chief Executive
Officer
Ensures the implementation of risk management framework and process and ongoing risk assessment of risks.Promotes risk culture and ensures the risk management process is sustained organization wide.
Risk Management
Committee
Defines the risk management policy framework and process.Promotes and implement monitoring of risk management strategies and policies.
Risk Manager Is the risk management process owner. Ensures the implementation and compliance with the risk management policy and process.
Audit Committee Ensures adequacy of control frameworks to manage risks across the organization - monitoring.
Treatments of Risks
Risk management is a Continuous Journey
THANKS FOR YOUR TIME AND ATTENTION