Introduction to Risks Management

1. Introcduction to Risks :

1.1 Risk

Where opportunity exists, there is risk also  

On taking opportunity, there are chances to achieve it as expected or not

Variation between expectation and happenings

1.2 What is uncertainty

Unpredictable, unforeseen

Having no pre-perception due to lack of adequate information

1.3 What are upside and down side risks

Optimistic- upside, way to expectation

Pessimistic –down side, may not accordingly

1.4 How far does risk affect a business achieving its objectives

Business could not start on the possibility of fully adverse affect and vice-versa

Risks may exist between optimum expectation and actual expectation 

Risks may exist between good and bad

2. Risks for business and their investors

2.1 Risks for business 

2.2 Risks for investors

Lenders- uncertainty of default 

Shareholders-losing investment and possibility of becoming insolvent

    2.3 Risk and strategic planning

• Planning to mitigate risk to critical success factors (CSF)
• Choice of taking types or level of risks by business house-some may take high risks, some may take moderate and some may be risks aversion (risk appetite, attitude to risks and expected returns) 

   3. Type of risk

• Business risks (strategy, enterprise, product, economic, technology, and property)
• Non-business risk –market or economic risk (Financial Risks, Operational Risks)

4. Risks concepts

      Extent of the risks

–exposure (compared to others),

-volatility (dependency to alter of exposure or factors)

-Impact (measure of the amount of loss of risks)

-Probability (likeliness of happenings)

 5. The objectives of risks management

     Includes –Identifying, analyzing and controlling risks/threats to the business

5.1 What is risks management?

       Monitoring and controlling threaten to the assets and earning of the business

Risk Management involves:

1. Risk assessment of any work activity;
2. Control and monitoring of such risks; and
3. Communicating these risks to all persons involved.

5.2 When is risk management necessary?

The global financial shocks over the past few years have encouraged investors, regulators and other stakeholder.

An organization should have a risk management strategy because:

• People are now more likely to sue. Taking the steps to reduce injuries could help in defending against a claim.
• Courts are often sympathetic to injured claimants and give them the benefit of the doubt.
• Organizations and individuals are held to very high standards of care.
• People are more aware of the level of service to expect, and the recourse they can take if they have been wronged.
• Organizations are being held liable for the actions of their employees/volunteers.
• Organizations are perceived as having a lot of assets and/or high insurance policy limits.

6. The risks management process

There are many models, frameworks, and processes for managing risks-all of which discuss planning for an uncertain future

The risk management process is a simple process consisting of five steps

1. Identifying what risks a business might face.
2. To analyze or assess which of the risks listed will have the most impact on the company
3. Creating a treatment plan
4. After assessing each risk, they must be evaluated.
5. Ongoing risk monitoring

7. Crisis Management

Today not only traditional emergency responders (police, firefighters, and emergency medical teams) must be ready for crises, but also private and nonprofit organizations, as well as a wider spectrum of public sector responders (for example, public health, transportation, and public works).

The first step in effective crisis management is to understand the specific and unique threats and risks to your organization.

Types of crisis

Crises have many sources, some of which are common to all organizations. Others are specific to

Certain industries.

s of crisis

1. Technological Crisis
   • Technological crisis arises as a result of failure in technology. Problems in the overall systems lead to technological crisis.
   • Breakdown of machine, corrupted software and so on give rise to technological crisis.
2. Confrontation Crisis
   • Confrontation crises arise when employees fight amongst themselves. Individuals do not agree to each other and eventually depend on non productive acts like boycotts, strikes for indefinite periods and so on.
   • In such a type of crisis, employees disobey superiors; give them ultimatums and force them to accept their demands.
   • Internal disputes, ineffective communication and lack of coordination give rise to confrontation crisis.
3. Crisis of Malevolence
   • Organizations face crisis of malevolence when some notorious employees take the help of criminal activities and extreme steps to fulfill their demands.
   • Acts like kidnapping company’s officials, false rumours all lead to crisis of malevolence.
4. Crisis of Organizational Misdeeds
   • Crises of organizational misdeeds arise when management takes certain decisions knowing the harmful consequences of the same towards the stakeholders and external parties.
   • In such cases, superiors ignore the after effects of strategies and implement the same for quick results.

Crisis of organizational misdeeds can be further classified into following three types:

1. 1. Crisis of Skewed Management Values
      • Crisis of Skewed Management Values arises when management supports short term growth and ignores broader issues.
   2. Crisis of Deception
      • Organizations face crisis of deception when management purposely tampers data and information.
      • Management makes fake promises and wrong commitments to the customers. Communicating wrong information about the organization and products lead to crisis of deception.
   3. Crisis of Management Misconduct
      • Organizations face crisis of management misconduct when management indulges in deliberate acts of illegality like accepting bribes, passing on confidential information and so on.
2. due to Workplace Violence
   • Such a type of crisis arises when employees are indulged in violent acts such as beating employees, superiors in the office premises itself.
3. Due to Rumours
   • Spreading false rumours about the organization and brand lead to crisis. Employees must not spread anything which would tarnish the image of their organization.

1. • A crisis also arises when organizations fail to pay its creditors and other parties.
   • Lack of fund leads to crisis.

1. Due to Natural Factors
   • Disturbances in environment and nature such as hurricanes, volcanoes, storms, flood; droughts, earthquakes etc result in crisis.

1. Crisis
   • As the name suggests, such situations arise all of a sudden and on an extremely short notice.
   • Managers do not get warning signals and such a situation is in most cases beyond any one’s control.

1. Crisis
   • Neglecting minor issues in the beginning lead to smoldering crisis later.
   • Managers often can foresee crisis but they should not ignore the same and wait for someone else to take action.
   • Warn the employees immediately to avoid such a situation.

Managing a crisis

• Being Unprepared Is No Excuse
• You Know The Threats – Get Ready For Them.
• Know What You Want To Say Before They Ask
• Admit That You Are Wing-It-Challenged
• Beware Of The Court Of Public Opinion
• Every Crisis is An Opportunity.

8. Disaster recovery

Disaster –major breakdown in the business and resultant losses.