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Research Assignment Presented to Mr. Sankarshan Sarkar, Faculty, Management of Risk NIIT University, Neemrana Ra asthan, India
Pre!ared "y# Aman chandan $a%i% &han M' (urga Prasad Nayanchand Rao Nitu Roy
Contents
*ontents'''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' ) A"+TRA*T'''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' , INTR-(U*TI-N''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' , .IT/RATUR/ R/0I/1''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' , -"2/*TI0/ '''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' , M/T$-(-.-34''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' , T4P/ -F +TU(4'''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' 5 ANA.4+I+ 67ualitative and 7uantitative 8 (urga, Nayan9''''''''''''''''''''''''''''''''''''''''''''''''''''''''''5 *ase +tudy1 8 Individual *ases 6$a%i%9'''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''': *ase +tudy) 8 Individual *ases 6Nayan9''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''': *ase +tudy, 8 Individual *ases 6Nitu9''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''': *ase +tudy5 8 Individual *ases 6(urga9''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''': *ase +tudy; 8 Individual *ases 6Aman9'''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''': *-N*.U+I-N 6Aman and $a%i%9''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''': R/F/R/N*/+'''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' : Anne<ure 8 1''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' :
ABSTRACT
The !ur!ose of this re!ort is to identify, categori=e, measure risks associated >ith the Airline Industry' Furthermore, the re!ort also e<!lores suita%le risk management and mitigation techni?ues for the same' The o!erational com!le<ity inherent in this %usiness, together >ith the highly regulated and commercially com!etitive environment of the airline industry, leaves any !artici!ant e<!osed to a various of risks' Many of these risks 8 for e<am!le changes in governmental regulation, acts of terrorism, !andemics and the availa%ility of funding from the financial markets 8 can %e mitigated to a certain degree %ut remain largely under the clout of e<ternal factors'
INTRO !CTION
The civil aviation sector in India had %een gro>ing at a dramatic rate@ ho>ever the glo%al economic recession in )AA: negatively affected this gro>th' (uring fiscal year )AABCAD, total !assenger traffic gre> )D') !ercent, >hile cargo traffic gre> 11') !ercent' Thus, risks management and mitigation associated >ith the %usiness needs to kee! !ace >ith this gro>th' The free market dynamics of the domestic airline industry are driving %usiness model changes at an un!recedented !ace' The introduction of ne> security !rovisions, com%ined >ith escalating fuel costs and consumer uncertainty are forcing radical ad ustments in the airline industry' As a result many airlines have sought the !rotection of "ankru!tcy to identify and remediate %usiness risks in their organi=ations@ this has forced some airlines to e<!lore %usiness restructuring and mergers as an alternative' This %usiness climate re?uires the consideration of ho> to %alance risks and re>ard, >hile integrating ne> !rocess and o!erations'
"IT#RAT!R# R#$I#%
Ta%le 1'1 8 (etails of revie> &ear Conducted '( etai)s of studies
OB*#CTI$#
Identification, assessment and classification of risks in aviation industry and e<!loring risk management E mitigation techni?ues for the same'
M#T+O O"O,&
The follo>ing methodology is ado!ted to achieve afore said o% ective'
1' Identification and assessment of all !ossi%le Risks in Airline industry )' *ategorical classification of the identified risks ,' Measurement of these risks 5' /<!loring various risk management and mitigation techni?ues for dealing >ith these risks
The overall risks associated >ith the Airline industry is as identified in ta%le 1'1' The most %asic tool is the risk matri< sho>n in figure 1')' It assesses t>o items# the likelihood of an event occurring and the conse?uence of that event'
A sam!le risk assessment matri< can %e used to differentiate a high risk and lo> risk event' Further, the mitigation is !lanned as !er the !ro%a%ility of occurrence of an event leading to such risk and the severity of the conse?uence of risk' The follo>ing guidelines have %een used for making assessments of likelihood of an event that leads to risk' Pro%a%le 8 an event that occurs several times -ccasional C an event that !ro%a%ly occur some time Remote 8 an event is unlikely to occur, %ut is !ossi%le Im!ro%a%le 8 even is highly likely to occur Furthermore, guidelines that have %een used for making assessments of severity of risk is as follo>s' *atastro!hic 8 resulting in fatalities and total loss *ritical C that causes severe damage Marginal 8 that results minor loss Negligi%le 8 that results in negligi%le loss 2the fo))o3ing diagram is 4ust for reference for us to 3rite more on the risks5
The most %asic tool is the risk matri<' FFigure 5C1G It assesses t>o items# the likelihood of an event occurring and the conse?uence of that event' CLASSIFICATION OF RISKS The overall risks associated >ith the Airline industry is categorically classified in ta%le 1')' Matri< Risk !riority matri< is as sho>n in figure 1',' MEASURMENT OF RISKS 0aria%les identified to measure these risks ?uantitatively are as noted %elo>'
S ). No . 1 ) , 5 ; B D H : 1A 11 1)
$ a r ia ' )e s Firm +i=e .i?uidity Profita%ility -!erating .everage Financial .everage -!erating /fficiency 3ro> th 3lo%al +u%!rime crisis "usiness *yclicality Airline +afety 6Accidents9 ATF *ost Profita%ility
Me asure m e n t - aram e te r Total Assets *urret Ratio PAT, R-*/ Assett Turn over Ratio (e%t Ratio Asset turn over ratio *hange in /"IT +ense< .oad Factor No' of Accidents re!orted *urrecy Fluctuation 6U+( 0s' INR9 ATF /<!ense as a I of Total /<!ense
/JP.-RIN3 T/*$NI7U/+ F-R MANA3/M/NT AN( MITI3ATI-N -F RI+&+ /<!loring avenues to manage, mitigate and hedge risks is summari=ed in figure 1',' Risk management focuses on managing uncertainties around !hysical and financial assets' $o>ever, this re!ort is not ust focusing on risk management %ut also on mitigation and hedging techni?ues >hich not only !rotect, %ut also create enter!rise value %y lo>ering the effects of risk'
Case Stud(6 0 Indi/idua) Cases (+a'i') Case Stud(7 0 Indi/idua) Cases (Na(an) Case Stud(8 0 Indi/idua) Cases (Nitu) Case Stud(9 0 Indi/idua) Cases ( urga) Case Stud(: 0 Indi/idua) Cases (Aman)
Anne;ure 0 6