Business Risk and Management

Categories of Risk and Managing:

Categories of Risk and Managing Joseph Anbarasu

Various Risks:

Various Risks

Market Risk :

Market Risk This captures the worst case value change over the one-year time period as a result of changes in specified financial risk factors for example, equity and real estate returns, and yield curve shifts, The changes are applied to policyholder liabilities, assets backing these liabilities and the assets not directly backing these liabilities.

Credit Risk :

Credit Risk This captures the worst case value change over the one-year time period as a result of credit defaults, rating changes and spread moves, the changes are applied to fixed interest holdings and receivables of the company.

Liability Risk :

Liability Risk This captures the worst case value change over the one-year time period as a result of fluctuations in current insurance claims experience and revisions to estimates of future insurance claims experience. For life insurance, this relates to the fluctuations in the incidence of mortality, longevity, morbidity and insured accident and disability events. For general insurance, this relates to the adequacy of existing reserves to meet claims arising from elapsed exposure periods, and of earned premiums over the scenario period to meet claims arising from that period of exposure (including claims arising from catastrophes).

Business Risk :

Business Risk This is the fundamental risk associated with 'being in business'. It captures the worst case value change over the one-year time period due to fluctuations in volume, margin, expenses and lapse experience (including only non-market related lapses).

Operational Risk :

Operational Risk This captures the worst case value change over the one-year time period due to the occurrence of unexpected one-off events (internal or external) in relation to people, processes or systems. Examples include systems failure, process errors, control failures, fraud, litigation, staffing issues, regulatory breach and external disruption..

Risk Management:

Risk Management Meaning Beneficiaries Methods Customs

What is Risk Management?:

What is Risk Management? Good management practice Process steps that enable improvement in decision making A logical and systematic approach Identifying opportunities Avoiding or minimizing losses

Meaning:

Meaning The process of identification, analysis and either acceptance or mitigation of uncertainty in investment decision-making. Example the recession that began in 2008 was largely caused by the loose credit risk management of financial firms.

Risk Management:

Risk Management Risk Management is a methodology that helps managers make best use of their available resources

Beneficiaries:

Beneficiaries Risk Management practices are widely used in public and the private sectors, covering a wide range of activities or operations.

Who uses Risk Management?:

Who uses Risk Management? It is a unique and specialized skill. Risk Management is an emerging course in the universities and colleges in India The Risk Management process is well established. (International RM process standards.)

Risk and Management:

Risk and Management Risk Management is now an integral part of business planning.

How is Risk Management used?:

How is Risk Management used? The Risk Management process steps are a generic guide for any organisation, regardless of the type of business, activity or function. Risk Management Process has Seven Steps

Basic Process Steps:

Basic Process Steps

Additional Process:

Additional Process Risk is dynamic and subject to constant change. Therefore, the process continues

Lay Down the Risk Context:

Lay Down the Risk Context What does your organisation do? Anything that poses a risk to what your organisation is trying to do needs considering; this will include social, economic, legal, technological or environmental factors. You may not be able to control some of these factors but you can minimise the risk they might pose. The Stockholders are individuals who may affect, of be affected by, any of your decisions on risk management. Stakeholders include employees, volunteers, visitors, insurance organisations, government and suppliers. Each stakeholder will have different needs, concerns and opinions; it is important to communicate with the stakeholders during the risk management process.

Identify the Risks:

Identify the Risks How do you identify the different types of risks? Look at records of previous activities, events or exhibitions Examine the results of personal, local or overseas experiences Interview/survey stakeholders Analyse specific scenarios.

Analysis of Risk:

Analysis of Risk In analysing decide on the relationship between the likelihood of a risk occurring the consequences of the risk you have identified. define the level of risk and what it means in terms of managing the risk.

Evaluation of Risk:

Evaluation of Risk Your evaluation will take into account the following: the importance of the activity you are risk managing and its outcomes the degree of control you have over the risk the potential and actual losses which may arise from the risk the benefits and opportunities presented by the risk.

Manage the Risks:

Manage the Risks The next step in the risk management process is managing your identified risks. You can do this by: Identifying options to treat the risk Selecting the best treatment option Preparing a risk treatment plan Implementing a risk treatment plan

Treat the Risk:

Treat the Risk Document your risk management plan and describe the reasons behind selecting the risk and for the treatment chosen. Record allocated responsibilities, monitoring or evaluation processes, and assumptions on residual risk.

Monitor and review:

Monitor and review In identifying, prioritising and treating risks, organisations make assumptions and decisions based on situations that are subject to change, (e.g., the business environment, trading patterns, or government policies). Risk Managers must monitor activities and processes to determine the accuracy of planning assumptions and the effectiveness of the measures taken to treat the risk. Methods can include data evaluation, audit, compliance measurement.

The Risk Management process::

The Risk Management process: