Overview

• Risk Management


  Organizations face a very wide range of risks that can impact the outcome of their operations. The desired overall aim may be stated as a mission or a set of corporate objectives. The events that can impact an organization may inhibit what it is seeking to achieve (hazard risks), enhance that aim (opportunity risks), or create uncertainty about the outcomes (control risks). Risk management needs to offer an integrated approach to the evaluation, control and monitoring of these three types of risk.

  
• Benefits of Risk Management

  • Mandatory
  • Assurance
  • Decision-making
  • Effective and efficient core processes

  
• Mandatory


  Risk management activities designed to ensure that an organization complies with legal and regulatory obligations, as well as customer or client requirements
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  The board of an organization will require assurance that significant risks have been identified and appropriate controls put in place
• Decision-making


  The organization should undertake risk management activities that provide additional structured information to assist with business decision making

  
• Effective and efficient core processes


  A key benefit from risk management is to enhance the effectiveness and efficiency of operations within the organization. Additionally, it should help ensure that business processes (including process enhancements by way of tactics, projects and other change initiatives) are also effective and efficient.
• Timescales of risk management benefits

  • Strategy
  • Tactics
  • Operations
• Strategy, tactics and operations are underpinned by the need to achieve compliance. Strategic, tactical, operational and compliance (STOC) core processes and activities encompass the whole range of processes of an organization.
• Good risk management must have a clear set of desired outcomes/benefits. Appropriate attention should be paid to each stage of the risk management process, as well as to details of the design, implementation and monitoring of the framework that supports these risk management activities.

  
• Features of Risk Management

  • Proportionate
  • Aligned
  • Comprehensive
  • Embedded
  • Dynamic

  
• The global financial crisis does not demonstrate the failure of risk management, but rather the failure of the management of organizations to successfully address the risks that they faced.
• Risk


  A chance or possibility of danger, loss, injury or other adverse consequences', and the definition of at risk is 'exposed to danger'. Risk may have positive or negative outcomes or may simply result in uncertainty.
• Types of Risk

  • Compliance (or mandatory) risks
  • Hazard (or pure) risks
  • Control (or uncertainty) risks
  • Opportunity (or speculative) risks

  
• Hazard risks


  Risks associated with a source of potential harm or a situation with the potential to undermine objectives in a negative way. Hazard risk management is concerned with mitigating the potential impact.
• Control risks


  Risks that give rise to uncertainty about the outcome of a situation. The management of control risks will often be undertaken in order to ensure that the outcome from the business activities falls within the desired range.
• Opportunity risks


  Risks that organizations deliberately take, especially marketplace or commercial risks, in order to achieve a positive return. The purpose is to take action that involves risk to achieve positive gains.
• Inherent Level of Risk


  The uncontrolled level of all risks that have been identified, before any actions have been taken to change the likelihood or magnitude of the risk.
• Identifying the inherent level of the risk makes it possible to identify the importance of the control measures in place.

  
• Risk matrix


  A tool that plots the likelihood of an event against the magnitude or impact should the event materialize.
• Investment environment can be defined as the existing investment vehicles in the market available for investor and the places for transactions with these investment