TOPIC 1

INTRODUCTION TO
RISK MANAGEMENT
SUBTOPICS
Concept of Risk and Risk Management
Type of Business Risk
A Brief History of Risk Management
What is Enterprise Risk Management?
The Importance of Enterprise Risk
Management (ERM)
 DEFINITION
Risk
-possibility of an event occurring or not
occurring that will adversely affect the
business organisation in achieving its
business objectives and executing its
business strategies successfully.
-various definition
-negative impact?
Sharpe?
 Definition
Risk Management
- a proactive and an on-going process involving
the identification, assessment, control,
monitoring and reporting of risk exposure
-enhance and encourage the identification of
greater opportunities for continuous
improvement through innovation
-involve board and senior management, daily
business decisions, value of the organisations
intangible assets
 TYPES OF RISKS
Financial
-interest rate
-economic crisis
-forex
-liquidity
-operational
-credit
-commodity
 Non-Financial
- Tax
- Business Process
- Legal -FTA
- Regulatory
- Fraud
- Accident
- Computer Systems
- Environment/Flood/Tsunami
- Operational Error
Management
- Human behaviour
- Labour Market
- Reputation- Deloitte
- Structure
- Skills
- Project Management You are fired!
So risks involve
- Daily life
- Business risk
- country risk
- political risk
- economic risk
- commercial risk
- financial/non financial
Internal Auditors
Why them?
A disciplined approach to evaluate and
improve the effectiveness of risk management
control and governance process
auditing risk management
Active continuous support and involvement in
the risk management process
Managing and coordinating the risk
management process
Report to management and BOD
Sound risk management process in place and
functioning
 RISK MANAGEMENT PROCESS

Identify and Assessment

Source
Measurement
Management Strategies
Monitor
Communicate
Continuous Improvement
 RISK ASSESSMENT

Establish of business objectives that are

aligned to the business plan
Identify of all critical risks
The source origins of risks
Measurement of risks in terms of impact
on the organisation
RISK MANAGEMENT STRATEGIES

Develop strategies for dealing with risks,

i.e. retain, avoid or reduce
Formulate detailed action plans that are
relevant to the risk management strategies
undertaken.
 RISK MONITORING

To monitor risks, the effectiveness of

existing controls and the implementation of
action plans.
To ensure that risk management process
is effective
To continuously improve the organisations
risk management capabilities
Risk Management Framework/Model
Risk Management Framework/Process
 Treatment of Risks

Reject
-Avoid
Accept
-Retain
-Reduce
-Transfer
-Exploit