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BWRR3033: RISK MANAGEMENT

Rodziah Ahmad Risk Management Dept. SEFB, COB UUM Sintok, Kedah.

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Chapter 2: Corporate Risk Management

Definition

The importance of risk management

Risk management standard Risk management process Risk management vs Insurance management Risk management objectives Roles of risk manager Enterprise Risk Management (ERM)

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Learning Objective
Describe the evolution of modern risk management

Define and explain the meanings of risk management

Explain the importance of risk management Distinguish between risk management and insurance

management Describe the process of risk management Comprehend the concepts of ERM

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Evolution of Risk Management

RISK

SPECIFIC

OBJECTIV E

INSURANCE

PURE RISK

MANAGEMENT

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Risk Management

Definition: Scientific approach to the problem of dealing with the pure risk faced by individuals and business.

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Risk Management
Science to design and implement procedures minimize frequency and severity of loss. that

RISK CONTROL

RISK FINANCING

RISK AVOIDANCE

RISK REDUCTION

RISK RETENTION

RISK TRANSFER

Risk Management Process

5. Reporting & Monitoring 1. Identification

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4. Implementation

2. Measurement

3. Selection RM techniques

Ri s k m a n a g e r s
o

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l
e s o f

1. Assist in developing RM policy 2. Engage in risk identification and measurement 3. Select risk financing alternatives 4. Negotiate insurance coverage 5. Manage insurance claims 6. Supervise internal administration 7. Communicate with other managers 8. Handle accounting 9. Administers risk functions. 10.Supervise loss prevention 11.Manage employee benefits

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Post in Organizations
Risk Surveyors

Risk Executives
Risk Managers Directors of Risk Management Vice President (Risk Management) Chief Risk Officer

Report to CEO

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Enterprise Risk Management

ERM in business are methods and processes to manage risk and seize opportunities to achieve enterprises objectives

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Enterprise Risk Management

Protect and create value for

Stakeholders

owners

society

employees customers

regulators

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COSO Enterprise Risk Management Framework (2004)

Objectives Components

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ISO31000: New International Risk Management Standard (2009)

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Common Challenges in ERM Implementation:

Identify executive sponsors for ERM Establish common risk language Describe entitys risk appetite Identify risks in risk inventory Implementing risk-ranking methodology Establish risk committee and/or CRO Establish risk owner Demonstrate the cost-benefit of risk management effort Develop action plans Develop consolidated reports Monitoring results of actions taken to mitigate risk Ensuring efficient risk coverage Develop a technical ERM framework

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Risk Management Objective

To guarantee post-lost adequacy of resources

To minimize cost of dealing with pure risk

To protect employees from serious injuries and death To meet legal & contractual objectives To eliminate worry

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ULTIMATE GOAL

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Risk Management Policy

Set Maximum Retention Limit 2. Minimum Retention level 3. Funding Retention Program 4. Employee Injuries
1.