RISK MANAGEMENT CONCEPT & PHILOSOPHY

RISK MANAGEMENT as a concept

In the organisation, everybody remains concerned about profit, performance and productivity. talks about vision, mission and goals. In the process, we forget to make provisions for unforeseen and uncertain losses.

RISK MANAGEMENT as a concept

In spite of best laid plans, practice, protections and precautions, accidents/losses do take place.
They are uncertain, unpredictable but inevitable.

RISK MANAGEMENT as a concept

Day by day

Things are becoming increasingly

COMPETITIVE, DEMANDING & AGGRESSIVE

Road ahead is uncertain and unpredictable Therefore calls for Prudent Risk management.

RISK MANAGEMENT as a concept

A systematic way of protecting business resources and income against losses so that the aims of a company can be reached without interruption

What Is Risk Management ?

The Identification , Analysis and Economic control of those risks which can threaten the assets, human being or earning capacity of an enterprise.

The real objective of Risk Management is to reduce fear of the unknown and unexpected events and to create confidence in future.

Why Risk Management is Important

Risk exists whenever the future is unknown.

fire

Risks
lightning

Business
accident flood

Exposures
Risk Management Planning organizing & controlling the activities of a firm to efficiently minimize the adverse impact of risks on the achievement of the companys goals.
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RISK MANAGEMENT as a concept

TYPE OF LOSSES

PROPERTY LIABILITY PERSONNEL LOSSES PECUNIARY LOSSES

It is necessary to know the Financial aspects of various losses that can occur inspite of the fact that sufficient care has been taken

Economic cost of risk

Property losses

Costs of Unexpected losses

Liability losses

Costs of Uncertainty itself

Personnel losses
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RISK MANAGEMENT as a concept

TYPE OF LOSSES

PROPERTY damage or loss resulting from fire, explosion, flood, theft or any other peril.

LIABILITY for injury to third party damage to their property caused by negligence Or other tortuous act of the firm Or its employees .

RISK MANAGEMENT as a concept

TYPE OF LOSSES

PERSONNEL LOSSES injury or death of employee and may involve extra cost by way of compensation

PECUNIARY LOSSES such as interruption due to damage, loss of sale, business misappropriation or theft of money .

RISK MANAGEMENT as a concept

OBJECTIVES

THE REAL OBJECTIVE OF RISK MANAGEMENT IS TO REDUCE FEAR OF THE UNKNOWN & UNEXPECTED EVENTS & TO CREATE CONFIDENCE IN FUTURE
PROTECTION OF THE COMPANYS ASSESTS AND EARNINGS AGAINST LOSSes , Including PROTECTION against LEGAL LIABILITIES, AT A MINIMUM COST ( Premium) COMMENSURATE WITH SATISFACTORY COVER .

RISK MANAGEMENT as a concept

WHY
High Capital Intensive in nature.
Risks beyond human control Element of uncertainty

Protection & Security for growth.

RISK MANAGEMENT as a concept

Managing & Risk Planning

Risk identification Risk Avoidance Risk Reduction Risk Retention Risk analysis / measurement Risk transfer (by Insurance)

RISK MANAGEMENT PROCESS

Identification
NO

IS THERE A RISK
YES HAS IT BEEN MEASURED YES IS IT SIGNIFICANT NO DISREGARD YES AVOID / ELEMINATE YES CAN IT BE AVOIDED OR ELIMINATED NO CAN IT BE REDUCED YES IS RESIDUAL RISK SIGNIFICANT NO YES IS IT A CATASTROPE RISK NO CAN IT BE RETAINED YES YES NO DISREGARD NO

ANALYSE RISK

Evaluation

Control

Financing
12/20/2013

RETAIN RISK INSURE

NO TRANSFER
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OTHER

RISK MANAGEMENT as a concept

Insurance

WHAT IS INSURANCE ? ?? ???

RISK MANAGEMENT as a concept

Insurance Insurance is a contract whereby in return for the payment of premium by the insured ( the Owner), the insurers ( Company) pay the financial losses suffered by the insured as a result of the occurrence of unforeseen events.

RISK MANAGEMENT as a concept Basic Principles of Insurance

Utmost good faith Insurable interest

Proximate cause. Indemnity

RISK MANAGEMENT as a concept

Basic Principles of Insurance

Utmost Good faith

Both the Insured ( owner ) & the Insurer ( the Insurance company) are Parties to the contract, and are required to observe good faith in respect of the transaction. the seller.. insurer cannot mislead the buyer .. insured. the Owner .proposer has a legal duty to disclose all Material Information about the subject matter of insurance to the insurers.. Company Material information . enables to insurer to decide a) Whether they will accept the risk, & b) If so, at what rate of premium, & c) Subject to what terms and conditions

RISK MANAGEMENT as a concept

Basic Principles of Insurance

Insurable Intrest
Insurable interest The owner of a property has a right to effect insurance on the property if he is likely to suffer financially when the property is lost or damaged to accident. This is a legal right which is called insurable interest.
Without insurable interest, the contract of insurance will be void.

RISK MANAGEMENT as a concept

Basic Principles of Insurance

Proximate Cause CLAIMS ARE PAID BY THE INSURERS, If the LOSS is PROXIMATELY CAUSED BY A PERIL INSURED AGAINST.

RISK MANAGEMENT as a concept

Basic Principles of Insurance

Indemnity
Principle of indemnity states that under a policy of insurance, the insured after a loss is to be placed in the same financial position in which he was immediately before the occurrence of loss.

Insured cannot recover more than his financial loss. Object of insurance is to protect the financial interest of the insured

Limitation of Insurers liability

a) If sum insured is less than the measure of indemnity, only sum insured is payable. b) Property insurances-Condition of average If there is under insurance only proportionate value is payable. C) Excess clauses

RISK MANAGEMENT as a concept the

Insurer ????

In Public Sector there are two Insurance Companies L I C . Life Insurance Company .. Deals with Life Policy GIC General Insurance Company . Deals with Assests & Properties NICL. National Insurance Co. UIIC.. United India Insurance Co. OIC Oriental Insurance Co. NIAC .. New India Assurance Co. In Private Sector major names are

IFFCO-TOKIO GEN. INS. CO. BAJAJ ALLIANZ GEN INS. CO. RELIANCE GEN. INS.CO.LTD. ICICI LOMB. GEN. INS.CO.LTD. TATA AIG GEN. INS.CO.LTD. ROYAL SUNDARAM INS CO.LTD. CHOLAMANDALAM MS GEN.CO.LTD HDFC CHUBB. GEN.INS CO.LTD.

RISK MANAGEMENT as a concept

the Perils
IMPACT OF VEHICLES / AIRCRAFT

EFFECTS OF INTERNAL FIRE / EXPLOSION NATURAL PERILS (STORM,EARTHQUAKE,.)

FIRE,EXPLOSION MACHINERY BREAKDOWN

THIRD PART CLAIMS

ELECTRICAL/ MALICIOUS ELECTRONIC DAMAGE DAMAGE / ARSON NEGLIGENCE OF EMPLOYEES TRANSPORTATION DAMAGE
ACCIDENTS STRIKE

DEFECTIVE PRODUCT

EFFECTS OF LIGHTININGS OR FIRES SPREADING FROM NEIGBOURHOOD

POLLUTION
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INSOLVENCY OF CLIENT

RISK MANAGEMENT as a concept the

Type of Covers

CONVENTIONAL COVERS

CUSTOMISED COVERS

TARIFF

NON TARIFF i) PACKAGE POLICY ii) SPL.CONT.POLICY (ON FIRST LOSS) ETC.

i) FIRE i)MARINE ii) MBD ii)SPL.CONT. iii) CPM iii) GPAI ETC. iv) MV v) BE vi) EEI vii) IAR ETC. viii) EAR Insu. ix) Public Liability Act policy

RISK MANAGEMENT as a concept

the Operating Policies

Policy MEGA Risk Package Policy Sum Insured (Cr.) AR- 126668.9 Cr. MBD-95001.68 Cr. Terrorism-126668.9 Cr. AR- 2297.37 Cr. Terrorism- 6047.32 Cr. 500 Cr. 55152 Cr. 5661.69 Cr. Premium (`) 70,44,47,070.00

CPM Package Policy

21,08,46,000.00

D&O Liability Ins. Policy Public Liability Ins. Act Policy (PLIA) Group Personal Ins. Act Policy (GPAI)

56,52,875.00 3,01,308.00 4,24,51,206

RISK MANAGEMENT as a concept

the Operating Policies contd.

Policy Doctors Liability Policy Fire Policy for EOC, R&D, Satellite Earth Station, NFL & PMI Laptop/ Notebook Policy at EOC Laptop/ Notebook Policy at SCOPE Contigency Insurance of Cenpeep & R&D Eqpts. Insurance of Office Assets at SCOPE, AGV, MOP, Neeti Bagh Sum Insured (Cr.) 0.2 Cr. Fire- 136.47 Cr. Burglary- 52.16 Cr. 0.36 Cr. 0.63 Cr. 17.87 Cr. Premium (`) 56,452.00 1,07,583.00

21,786.00 24,174.00 1,77,452.00

17.22 Cr.

14,919.00

FIRE INSURANCE Risk covers

All operating power stations shall be insured on reinstatement basis under standard fire & special perils policy covering the following risks.
a) Fire b) Lightening c) Explosion/Implosion d) Aircrafts Damage e) Impact Damage f) Subsidence and landslide including Rock slide g) Bursting and/or over-flowing of water tanks, apparatus and Pipes h) Missile testing operations. i) Leakage from Automatic sprinkler installations. j) Bush Fire k) Riot, strike and Malicious Damage (optional) l) Storm cyclone, Typhoon, Tempest, Hurricane, Tempest Flood and Inundation (optional)

PERIOD OF COVER

The insurance cover commences From mid night of the day premium is paid. & The Period of insurance is normally one year

RISK MANAGEMENT as a concept

the Scope of Covers

Location Risk - Fire, Lightning, Theft & Burglary. Handling Risk - Impact from falling objects, collision failure of chains or tackles. * Operation Risks- Failure of Safety device, leakage of electricity short circuit explosion etc. *Risk of human - Carelessness, negligence, faults in element erection, malicious damages, strikes, & riots. *Acts of God - Storm from hurricanes, flood, landslide, rocks slide earthquake etc.

EXTENSION OF COVERS

Earthquake- The zones covered under the scope is III & IV. The risk for zone I & II are only covered against extra premium. Secondhand Machinery- Can be covered only against extra premium. Dismantling cover- an appropriate cover can be obtained against additional premium as per tariff. Coverage for removal of debris third party liability owners surrounding property- Can be obtained by paying additional premium. Marine cover- The overseas as well as inland transit portion of the risk can be covered against extra premium.

EXCLUSIONS .. On package to package basis

Loss of Damages due to faulty designs, defective materials, bad workmanship. Manufacturing Defects- Being not related to erection work.. Loss or damages to erection machinery and equipment due to mechanical/electrical breakdown. Loss or damages due to willful act or negligence of the insured or his representatives. Loss or damages due to nuclear reaction, radiation. Loss due to normal wear and tear.

Upgrading Crisis Management Integrated Risk Management - Corporate Culture

Implementation

Corporate Goal Priority Philosophy, etc

Interactive Supplement
Hardware Software

Interlock Diagnosis system On line monitoring Detection & Suppression system, etc

Safety Organization Inspection & Maintenance Crisis Management system, etc

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Function & Role of Risk management

Brand image NTPC Risk improvement/ Loss control Risk Management

Optimize insurance program

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Thank You