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RISK MANAGEMENT

Prof.H.DAS

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Market risks

Raw materials rate

Quantities,quality,suppliers, lead times

interest rates risks and forex risks namely,fluctuations risks and interest rates risk inrespect of foreign exchange transactions

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Political risks

Elections

 War risks

Country /area risks

Insurance risks like fire,strikes,riots and civilcommotion, marine risks, cargo risks etc

Fiscal/monetary policy risks including taxation risks

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CREDIT POLICY

Credit worthiness risks

Risks in settlement of dues by clients

Provisions for doubtful bad debts

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Liquidity risks

Financial solvency and liquidity risks

Borrowing limits, delays

cash/ reserve management risks

Tax risks

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Disaster risks

Natural risks like fires, floods, earthquakes,

etc

Man made risks factor rising under thefactories act, mines act , etc

  risk of failure of effective disastermanagement plans formulated by thecompany

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System risks

System capacities

System reliability

Obsolescence risks

Data integrity risks

Coordinating and interface risks

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Legal risks

Contract risks

Contractual liability

Frauds

 Judicial risks

Insurance risks

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Risk management process

 A. Help and ensure that all the foreseeable risks involved re actually

understood And accepted before important decisions re taken.

B. Monitor new projects and ongoing operation to ensure that theycontinue to develop satisfactorily, and no problems or new risks

emerge

C. Better informed decision making-for example in assessing newopportunities

D. Less chance of major problems in new and ongoing activities

E. Increased likelihood of achieving corporate objectives

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 Managing The Risk

Tolerate

Treat

Transfer

Terminate

Take the opportunity

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Steps in risk management

Identification of risk

Evaluation/ measurement of risk

Handling of risks

Implementation of risk management decision

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i k l i /

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Risk evolution/ measurement

 A. The probability or chances that losses will occur

B. The impact the losses would have upon the financial aff airs ofthe firm should they occur

C. The ability to predict the losses that will actually occur during

the budget period

D. Risk retention

Risk retained as part of deliberate management strategy after

conscious ev aluation of possible losses and causes. This is known asactive form of risk retention

Risk retention occurred through negligence .this is known as

passive form of risk retention

d

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Contd…………… 

E Risk transfer :

Insurance does not protect a firm against perils occurring ; it offers restoration ,atleast in part of any resultant economic losses.

F Implementation of decision

Ri k h dli

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Risk handling

In every country there are governmental and official

regulations regarding health and safety at work: fireprecautions, hygiene , the construction and operation of vehicles, food and drink and many other matters relatingto property, personal injury and other risk. Example:

motor vehicles ACT and the ESI ACT

k d

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Risk reduction

The only cautionary note regarding risk reduction is thatas far as possible expenditure should be related topotential future saving in losses and other risk costs; inother words, risk prevention generally should be evaluated

in the same way as other investment projects

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