RISK Management– A Definition

 “Risk Management is the Identification, Analysis and

Economic Control of those RISKS which can
Threaten the Assets (Property, Human) or the
Earning Capacity of an Enterprise”


 Risk Management &
Corporate Governance

v
§ Business is synonymous with Risk
§ Structured definition and management of risks
§ Board of the enterprise to be fully aware of the
risks facing the company
§ Shareholders to know the process by which
their company manages its risks
v
v
 Need for Risk management

n Uncertainty in Enterprise
n Growing Complexity in Business Environment
n Statutory Obligations
n Contractual Obligations
n Social Obligations
n `Acts of God’ – Corporate Social Responsibility

 The Risk Universe

E N T E R P R I S E

O P E R A T I O N S F I N A N C I A L S T R A T E G I C K N O W L E D G E

P R O C E S S C A P I T A L S T R US CT TA UK RE E H O L D EI N R T S E L E C T U A L
P R O P E R T Y

P H Y S I C A L A S S R E E T PS O R T I N G G O V E R N A N C I EN F O R M A T I O N
M A N A G E M E N T

P E O P L E C R E D I T A N D ML I AQ R U KI D E I TT YS T R U C S T Y U S R T EE M S

L E G A L M A R K E T
 Process of Risk Management

Risk Identification
Risk Measurement
Risk Control
Risk Transfer
Risk Financing
Risk Retention


 Risk Assessment

FINANCIAL IMPACT:
Threshold Limit to be decided based
on the size of the corporate
Medium Risk Very High

Probability
Risk
Financial Impact
PROBABILITY OF OCCURRENCE:
Organization History & Industry
Experience should be considered
Low Risk High Risk
 Handling Risk

Risk Levels

Low & Medium Normal Monitoring at the operational level

High Close control of all potential contributing factors by the Risk

Management Team

Very High Risks of this level should be actively tracked for decisions by
the Risk Management Committee.
 Insurance
nAll Risks are not Insurable
nEssentials of Insurance
nInsurable Interest
nUtmost good faith

nProcedure for Insurance

nIdentification of Risks
nQuantify the Insurable value
nEvaluate the choices
nProposal
nPayment of premium
nPolicy Documentation

nClaims
nAdministration System
n
 Insurable Risks

PROPERTY RISKS PEOPLE RISKS

Damage to Physical Assets Loss to Employees
lActs lILL Health and
of God
lAccidents accident
lDeath
lBreak down
lOverseas travel
l

FINANCIAL RISKS
Monetary Loss from
LIABILITIES RISKS
lTheft and Burglary Loss from Operations
lProduct liabilities
lBusiness
interruption lPublic liability

lBad credit lDirectors & Officers

lInsolvency of liabilities
Vendor/Buyer lErrors & Omissions

lInsolvency of Supply liabilities

Chain
l
 Focus Areas for
Insurance Management

 Identification of Internal & External Pure Risks

 Existing Risk Control Measures Review
 Risk inspection
 Risk Audit
 Scrutiny of Existing Insurance Covers
 Coverage
 Rates & Deductibles (Compulsory self insurance)
 Defining Standard SOP for Claims Control
 Guidelines on documentation

 Emerging Challenges
Deregulation of Indian Insurance market

Global markets impact on Local market

Options for self insurance

Market driven pricing


Credits:

qIndia Insure Pvt. Ltd.

qIRDA
qWorking Notes from The Principles of Corporate
Finance, Brealey, Myers & Allen; McGraw-Hill; New
York; ISBN 10: 0-07-063580-3

Ashok Bhattacharjee
CATLeap, 152, New Civic Center, Bhilai

FOR YOUR COMMENTS:

ashokb2009@email.iimcal.ac.in