What is a Risk Management Process? The concept behind the process of risk management is extremely simple.

It is the process of anticipating and analyzing risks and coming up with effective and efficient ways of managing as well as eradicating them. Here are the different steps that are involved in this process: Risk Identification: The first step involves identifying risks. Certain risks could be quite obvious whereas a few others may need a certain amount of anticipation. There could be various types of risks such as: business risks financial risks commercial market-related risks technology risks short-term risks, long terms risks personal risks, etc. Try doing a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis; it will give you systematic results which will prove beneficial in risk identification. Identifying and anticipating risks is extremely important as it sets the stage for all further action and steps as part of the risk management plan. Risk Analysis: This is the next step as part of the risk management process. Once all the risks have been identified, it is time to analyze and scrutinize each one of them. Risk analysis should be done both qualitatively as well as quantitatively. Determine how big a threat each risk is, what could be its consequence, its impact, etc. Each risk will have a likelihood factor i.e., a probability factor. On the basis of its impact and its likelihood factor, you can prioritize different risks as serious, moderate, mild, etc. Use a color coding system for easy graphical analysis. Once you have all this data laid out in front of you, you will be in a position to rank individual risks. Risk Evaluation: This basically involves comparing the identified and analyzed risks with your individual goals or your company's preset goals and objectives. You can then choose to grade risks and decide the future course of action to be taken based on how severely the risk is likely to impact your goals, objectives and targets. Risk Treatment and Contingency Plan: The next step involves preparing a risk treatment and contingency plan. It is vital from the perspective of enterprise risk management. What will you do if the risk materializes? Can you do something to overcome the risk? Can you take some measures to lessen its impact? You should think about all these questions and come up with a risk treatment and contingency plan for the same. It should include ways in which to control as well as overcome the risk conditions. Risk Monitoring: This is not the next step as such, rather it is something

that should happen on a continuous basis at all stages of the risk management process. Have a RMMM (Risk Mitigation, Monitoring and Management) plan in place for the same. You can also make use of certain risk management software for this purpose. At the same time, there should be proper communication between the different departments involved in the process. Communication is vital because it can affect the entire process both negatively as well as positively.

risk

Definitions (6)Save to FavoritesSee Examples

1. A probability or threat of damage, injury, liability, loss, or any other negative occurrence that is caused by external or internal vulnerabilities, and that may be avoided through preemptive action. 2.

Finance: The probability that an actual return on an investment will be lower than the expected return. Financial risk is divided into the following categories: Basic risk, Capital risk, Country risk, Default risk, Delivery risk, Economic risk, Exchange rate risk, Interest rate risk, Liquidity risk, Operations risk, Payment system risk, Political risk, Refinancing risk, Reinvestment risk, Settlement risk, Sovereign risk, and Underwriting risk.
3. Food industry: The possibility that due to a certain hazard in food there will be an negative effect to a certain magnitude. 4. Insurance: A situation where the probability of a variable (such as burning down of a building) is known but when a mode of occurrence or the actual value of the occurrence (whether the fire will occur at a particular property) is not. A risk is not an uncertainty (where neither the probability nor the mode of occurrence is known), a peril (cause of loss), or a hazard (something that makes the occurrence of a peril more likely or more severe). 5. Securities trading: The probability of a loss or drop in value. Trading risk is divided into two general categories: (1) Systemic risk affects all securities in the same class and is linked to the overall capital-market system and therefore cannot be eliminated by diversification. Also called market risk. (2) Nonsystematic risk is any risk that isn't market-related or is not systemic. Also called nonmarket risk, extra-market risk, or unsystemic risk. 6. Workplace: Product of the consequence and probability of a hazardous event or phenomenon. For example, the risk of developing cancer is estimated as the incremental probability of developing cancer over a lifetime as a result of exposure to potential carcinogens (cancer-causing substances).

Read more: http://www.businessdictionary.com/definition/risk.html#ixzz2vMZv1h9b

Types of Risk
The types of risk that routinely affect investments include:

interest rate risk: when interest rates rise after you lock in your money, meaning you don't earn as much on your money as you would have if you'd invested at the higher rate liquidity risk: there might not be buyers interested in your investment when you want to sell credit risk: the organisation may not be able to repay its debts, and you might lose your money economic risk: the economy may or may not be doing well, which could affect the value of your investment industry risk: risks affecting a particular industry, like shortages of raw materials or changes in consumer preferences currency risk: your investment is affected by changes in the value of the New Zealand dollar inflation risk: your investment doesn't earn enough to keep up with inflation.

What is risk?
The Oxford English Dictionary (Oxford University Press, 1971) defines risk as a "hazard, danger; exposure to mischance or peril". Therefore, to put oneself "at risk" means to participate voluntarily or involuntarily in an activity or event that could lead to injury, damage, or loss.

Voluntary risks are hazards associated with activities that we decide to undertake (e.g., driving a car, riding a motorcycle, climbing a ladder, smoking cigarettes, skydiving, formula one racing). Involuntary risks are negative impacts associated with an occurrence that happens to us without our prior consent or knowledge. Acts of nature such as being struck by lightning, fires, floods, tornados, etc., and exposure to environmental contaminants are examples of involuntary risks.

Risks may also be defined as statistically verifiable or statistically nonverifiable. Statistically verifiable risks are risks for voluntary or involuntary activities that have been determined from direct observation. These risks can be compared to each other. Statistically nonverifiable risks are risks from involuntary activities that are based on limited data sets and mathematical equations. For example, we know the risk of a meteorite hitting a person is low, but because there is no record of such an event ever happening it is statistically nonverifiable. Statistically verifiable and nonverifiable risks are similar to apples and oranges in that they are both fruits but are so different that comparisons should not be made between the two.

What are the risks of some common activities and events?

Risks associated with different activities and phenomena vary greatly. For example, as the Riskometer illustrates, one's chances of getting struck by lightning in the United States is low compared to fatality due to fire. These are involuntary risks, those that we have little control over. Voluntary risks on the other hand are associated with activities which are largely controllable. Risk is part of living; consequently,we are constantly evaluating the risks which face us on a daily basis. You may not be conscious of this assessment as it is often ingrained in our thought processes; however you are considering risks, especially as they relate to voluntary activities, to ensure that you and those close to you are out of harm's way. For example, when leaving the house in the morning one may consider if there is a chance of rain. The risk of getting soaked on the way to work is a risk you could avoid by carrying an umbrella. Of course, there are many common activities that present more serious potentially life threatening risks. Transportation may be one of the most serious voluntary risks that we take on a regular basis. Driving a car or a motorcycle has a relatively high risk of injury due to accidents. Many of us may depend on driving a car to get to work among other destinations, we are willing to take the risk in order to support our families and for the convenience it provides. To reduce the risk of accident and injury safe guards such as air bags and antilock brakes are standard features on most vehicles. In addition, we can take risk precautions such as reducing speed and increasing following distance in poor driving conditions as well as wearing seat belts.

How are risks measured?

Risks to the public are measured by direct observation or by applying mathematical models and a series of assumptions to animal risk study results to infer potential risk to humans.

How are risks expressed?

No matter how risks are defined or quantified, they are usually expressed as a probability of effects associated with a particular activity. Risk/probability is expressed as a fraction, without units, from 0 to 1.0. A probability of 1.0 indicates an absolute certainty that an event or outcome will occur. Scientific notation is generally used to present quantitative risk information.
Actual Number Scientific Notation 1/10 1/100 1/1,000 1/10,000 1/100,000 1/1,000,000 1/10,000,000 1x10-1 1x10-2 1x10-3 1x10-4 1x10-5 1x10-6 1x10-7 1E-01 1E-02 1E-03 1E-04 1E-05 1E-06 1E-07 Read As One in ten One in a hundred One in a thousand One in ten thousand One in a hundred thousand One in a million One in ten million

Management Liability case studies

by Fran Molloy | Insurance Risk & Professional Jun-Jul 2011 Case study 1 - The tale of the stolen alcohol and the outlaw bikie gang The insured entity was a local hotel in north west Victoria. Over a period of approximately 12 months, the owner noticed a significant dip in sales and stock. The owner suspected that the theft of stock may have been attributable to the actions of patrons and installed hidden security cameras in an effort to catch someone in the act. After viewing the footage over the first month of installation, the owner was shocked to discover footage of four of his trusted employees, along with six patrons, blatantly stealing bottles of alcohol from behind the bar and from the stock room. After viewing the footage over the first month of installation, the owner was shocked to discover footage of four of his trusted employees, along with six patrons, blatantly stealing bottles of alcohol from behind the bar and from the stock room. The owner reported the theft to the police and all 10 people were charged. During questioning, one of the fraudsters revealed they had been involved in this scheme for the last six years and the alcohol was mainly being offloaded to an outlaw bikie gang who were then selling on the alcohol at a significant profit. In the meanwhile, the owner was struggling to calculate how much stock had been taken. The theft was reported to the insurer, which appointed a loss assessor, along with a forensic accountant. Given the length of time that the theft had been occurring, it took some three months of forensic analysis to ascertain that the loss amounted to a staggering $506,000. The police were unable to follow through their enquiries with the members of the bikie gang as the fraudster who first mentioned the involvement of the bikie gang retracted his statement. Not suprisingly, all 10 of the fraudsters combined did not have enough funds to make good the loss and the insured was only able to recoup $103,000 from the fraudsters. Fortunately, the insured was then able to claim the remaining $403,000 along with the investigation costs of $38,000 from the insurer. *Case study from DUAL Australia.

Case study 2 - occupational safety risks A restaurant suffered a loss when a young apprentice from a labour hire firm was seriously burnt when he spilt hot liquid on himself when carrying a heavy pot up stairs. He was breaking procedure. The labour hire firm processed a WorkCover claim and, under the ensuing investigation, the restaurant is currently being investigated, which could result in a hefty fine, and was required to spend tens of thousands of dollars on improvements to its operating procedures.

A restaurant suffered a loss when a young apprentice from a labour hire firm was seriously burnt when he spilt hot liquid on himself when carrying a heavy pot up stairs. He was breaking procedure. Though the restaurant had a public liability policy, there are exclusions that write out cover for personal injury to employees. Under the policy wording, any contracted or hired-in worker was viewed as an employee. WorkCover takes care of basic worker medical care and rehabilitation, but it is possible that a later claim might be taken against the company because he was a third party injured on the site. The restaurant had a management liability policy that covered occupational health and safety defence and investigation for the directors, not the entity. The directors had fulfilled their obligations in putting in place proper safety procedures and policies, but line management was liable for not enforcing the procedures on the ground. Fines and penalties were not covered under this policy, only defence costs. The policy they have is insufficient for their operations, says Anna Heyligers of Milne Alexander, currently advising the restaurant. Its an easy trap for brokers to be comfortable they are offering some protection to an industry that traditionally wouldnt be interested in the management liability product, she says.

Case study 3 - legal cover Pretesh Patel, National Underwriting Manager, Professional Liability for Wesfarmers, says that cases involving small business clients show the importance of Management Liability cover. Directors and Officers insurance is an important cover for small business. In one example, a female employee at a manufacturing company complained to its management on several occasions that she felt uncomfortable about sexually explicit emails sent around the office by her male colleagues and their comments directed to her about those emails. A female employee at a manufacturing company complained to its management on several occasions that she felt uncomfortable about sexually explicit emails sent around the office by her male colleagues and their comments directed to her about those emails Management didnt take her complaint seriously and didnt take steps to stop the emails. The female employee made a complaint to the NSW Anti-Discrimination Board, naming the individual directors of the manufacturing company. The directors eventually settled for $25,000 at a conciliation hearing.

Another significant risk for business can be ameliorated with Statutory Liability cover, Patel says. He cites the example of an industrial accident where some workers were unloading freight from a truck when the load shifted. This caused a hydraulic ram to fall, striking a worker and pinning him against a forklift.He was released but the load moved further, injuring another worker. Both workers suffered grievous bodily harm. Workplace Health and Safety Queensland investigated and found the company depots workplace health and safety systems did not meet the legislative requirements to ensure health and safety. The maximum penalty for such an offence is $500,000 for a corporation, $100,000 for an individual or two years imprisonment. Following legal advice, the company pleaded guilty and were fined $34,000 plus investigation and court costs.