1.Risk is all around us, over the last few years we have become more sensituationive and perhaps a little more accustomed to the types of risk we face. For example the recent economic recession highlighted the risk of interdependence of economies of the world; the 26/11 terrorist attacks in Mumbai reinforced the risk associated with the open waterways into the financial capital of our country.
2.There is a growing recognition that the risk is more complex and systematic than it has ever been. Despite this increased sensitivity and awareness of risk, we tend to be poor at assessing and managing those risks that we have direct control over. To a lesser or greater extent, we are taught from an early age to be careful and manage the low level risks we face quite carefully – such as crossing the road. So unless we are doing something that departs significantly from our daily routine, such as jumping out of an aircraft, we tend to take risk for granted. 3.Managing risk is an essential skill of all modern corporations and organisations. For those who manage risk well, the rewards can be great. AIM
The aim of this paper is to understand the concept of risk management
What is Risk?
5.Ask ten people what they think risk is and you’ll get ten different answers. It doesn’t take a thorough search of risk literature to reveal the same problem. Definitions abound and they’re all worded in only slightly different ways. What’s important is to understand the concepts underlying risk.
6.Risk is the chance of injury or loss. Insight can be gained by listening to how peoperationalerationalle refer to risk in an everyday context and, particularly, in the organisationenvironment. What emerangees is that there are different ideas about risk, based on personal perceptions. Nonetheless, its underlying concepts remain – a chance that something’s going to happen and consequences if it does.Rate of occurrence multiplied by the impact of the event equals risk.
What is Risk Management?
7.In ideal risk management, a prioritisation process is followed whereby the risks with the greatest loss and the greatest probability of occurring are handled first, and risks with lower probability of occurrence and lower loss are handled in descending order. In practice the process can be very difficult, and balancing between risks with a high probability of occurrence but lower loss versus a risk with high loss but lower probability of occurrence can often be mishandled.
8.Intangible risk management identifytifies a new type of a risk that has a 100% probability of occurring but is ignored by the organisation due to a lack of identify ability. For example, when deficient knowledge is applied to a situation, a knowledge risk materializes. Relationship risk appears when ineffective collaboration occurs. Process-engagement risk may be an issue when ineffective operationalerationalproc are applied. These risks directly reduce the productivity of knowledge workers, decrease cost effectiveness, profitability, service, quality, reputation, brand value, and earnings quality. Intangible risk management allows risk management to create immediate value from the identify and reduction of risks that reduce productivity.
9.Risk management also faces difficulties in allocating resources. This is the idea of operationalerationalportunity cost. Resources spent on risk management could have been spent on more profitable activities. Again, ideal risk management minimizes spending and minimizes the negative effects of risks.
10.Risk management introduces the idea that the likelihood of an event happening can be reduced, or its consequences minimised. In Organisation, the term is frequently used in the context of decision-making about how to handle situations which affect organisation safety. Effective risk management seeks to maximize the benefits of a risk (usually a reduction in time or cost) while minimizing the risk itself. 11.Risk management is the process of identifytifying risks, assessing their implications, deciding on a course of action, and evaluating the results.Effective communication is the key to the success of the process.