RISK & ITS MANAGEMENT

Risk A crisis situation involves : - a threat to resource & people, - a loss of control, - visible and / or invisible effects on people, resources & organizations. Hazard (cause) is defined as potential threat to humans & their welfare; Risk (consequences) is defined as the probability f a hazard occurring & creating loss; Two main categories of Risk : Involuntary risk, Voluntary risk.

Environmental Hazard Environmental hazard may be defined as extreme geophysical element, biological processes and major technological accidents, characterized by concentrated releases of energy or materials which pose a largely unexpected threat to human life and can cause significant damage to goods & the environment. Some potentially hazardous environment events are : Atmospheric, Hydrologic, Geologic, Biologic, and Technologic.

Risk analysis Risk assessment is the process by which results are considered against judgment, standards, & criteria, to show the measures in place are adequate; Risk identification involves generating lists of possible risks and sources of risks; Approaches to risk identification are : Brainstorming, Statistical review, Cued analysis, Walking around

Risk assessment A quantitative assessment may be conceptualized as ; Hazard (probability) X Loss (expected) Risk = Preparedness ( loss mitigation) A risk assessment should : analyze the likely outcomes f an action or event, identify the significant risks, assess the chance of outcome occurring, assess the potential consequences of the event, make a judgment on whether or not the outcome can be tolerated.

Risk management Risk elimination or reduction can be done to reflect four basic mitigation & basic response strategies : eliminate or reduce the risk, modify or transfer the risk, counter or insure against the occurrence of the risk risk, develop impact response & recovery strategies.

BUSINESS RISK

What is Risk ?  The term ‘Risk’ has a variety of meanings in business & everyday life ;  At its most general level, ‘Risk’ is used to describe any situation, where there is uncertainty about what outcomes will occur ;  Risk & uncertainty exist, whenever the future is unknown ;  Humanity’s struggle to manage or cope with risk is a crucial theme in social, economic & political history.

Essential concepts  Certainty is a state of being free from doubt ;  Uncertainty is a doubt about our ability to predict the future outcome of current actions ;  Risk is a potential variation in outcomes ;  Exposure to Risk is created, whenever an act gives rise to possible gain or loss that cannot be predicted.

Major types of Business Risk Price Risk Credit Risk Pure Risk Output Price Risk Input Price Risk Commodity Price Risk Exchange Rate Risk Interest Rate Risk Damage to assets Legal Liability Worker injury Employee benefits

Types of Risk  Price Risk refers to uncertainty over the magnitude of cash flows due to possible changes in output & input prices. The specific types of Price risk are : Commodity price risk arises from fluctuations in the prices of commodities, e.g. metal. Oil, etc. Foreign exchange rates fluctuation affect input & output prices ; Changes in interest rates affect the firm’s cost of borrowing funds to finance its operations.

Types of Risk (contd.)  Credit risk is a risk that a firm’s customers & the parties to which it has lent money will fail to make promised payments ;  Pure risk, the traditional risk concept, include : The risk of reduction in value of business assets due to physical damage, theft, & expropriation ; The risk of legal liability for damages for harm to customers, suppliers, shareholders, & other parties ;

Types of Risk (contd.) The risk associated with paying benefits to injured workers & the risk of legal liability ; The risk of death, illness & disability & other employee benefit plans.

DISASTER MANAGEMENT

Disaster Disaster is defined as an event, concentrated in time & space, in which a community experiences sever danger & disruption of its essential functions, accompanied by widespread human, material or environment losses, which often exceed the ability of the community to cope without external assistance. The reasons of increasing disaster are : - Population growth, - Economic growth, - Land pressure, - Technological innovation, - Urbanisation, - Social expectations, - Climate change, - Global interdependence. - Political change,

Disaster management Policy options : - Educational, - Economic, - Regulators. The reduction of risk through : Pre-disaster protection, Post-disaster recovery.