2.

Burden of Risk
From the two aviation tragedies of MH370 and MH17, we notice that MAS did not have a
sufficient and proactive risk management measures toward these events. Although, we had
found that the company was applied ERM framework as a methodology to manage their risk
but they were not fully applied the framework in the crisis. In fact, for the crashed of MH17,
Malaysian Airline System Berhad (MAS) tend to fly through the warzone in Ukarine which
was danger instead of choose another way. MAS was lack of experience in dealing with
aviation issues because the only time MAS faced with an aviation tragedy was on 4th
December 1977 where MH653 been hijacked and crashed in Tanjung Kupang, Johor and
everyone on board were dead. Thus, after the tragedy of MH370 in March 2014, MAS should
have concern about aviation tragedies and implement effective risk management measures to
avoid it happened again but they did not, thus the crashed of MH17 happened once again in
July 2014. In addition, MAS was making the damages of crisis become even worse by
providing conflicting reports, misleading information and backtracking from statements
which had further created confusion.
Well, even though MAS failed to avoid the risk to happen again, but they were still able to
transfer part of their risk by insurance. Example, an initial compensation of USD50, 000 was
paid to the family members of victims in tragedy of MH370 by Malaysias Airlines insurer,
Germany Allianz.
The parties that suffered from the burden of risk in the aviation tragedies were MAS, family
of victims and the shareholders. First, MAS was suffered from reputational risk and financial
losses cause by having aviation tragedies twice in year 2014. The creditability of the safety of
MASs aircraft was dropped along with the share price of the company because customers
will choose to go for other airlines company since MAS was not safety anymore. MAS was
nearly bankrupt in year 2014 and been takeover and nationalized by the Khazanah Nasonal
Berhad to stop the loss. For the family of victims, they had not only loss their loved one in
the tragedy. Besides, the victims in the tragedy could be the breadwinner of a family, thus the
families of victims maybe also loss the source of income of a family. Other than that, the
shareholders of MASs stock will be suffered a loss due to the de-listed of MAS from the
Bursa Malaysia.

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http://www.globalilluminators.org/wp-content/uploads/2014/12/ITMAR-14-144.pdf
[Accessed 25 Jul. 2016].
Annual Report of Malaysia Airline System Berhad. (2013). 1st ed. [ebook] Malaysia, p.44.
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