A Research Study On Management Of Risk Management

Speaker's notes: Risk is an everyday part of financial life. There are few decisions we can make which do not come with some degree of risk. However, it is important to understand and distinguish between different types of risks so we can better 'hedge' against potential unforeseen events and minimize our institution's exposure to financial dangers.

1. Distinguish between pure risk and speculative risk. List and explain in detail the three kinds of pure risk.

Risk or threat is common and found in various fields of daily life and business. This concept of risk is found in various stages of development and execution of a project. Risks in a project can mean there is a chance that the project will result in total failure, increase of project costs, and an extension in project duration which means a great deal of setbacks for the company. The process of risk management is composed of identifying, assessing, mitigating, and managing the risks of the project. It

Scenario: You are leading during the second day of the Self Reliant Camp in the Coffin Bay National Park. While exploring in the Pt. Whidbey Wilderness Area during lunchtime, one of the group was bitten by a snake just above the right ankle. They are complaining of pain and nausea, there are two puncture marks on the right foot.

a) Risk: 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.

The insured has over twenty (20) years experience in this field and have been operational on the premises for approximately seventeen (17) years with no known losses or claims. The building measures approximately 12,000 square feet. Business hours are 8:00 AM-8:00 PM Monday- Saturday and from 10:00AM-4:00PM on Sunday. The risk is an automobile dealership. They are an authorized VW- new car dealership. They will sell new and certified used vehicles. They do operate a service and parts department. The risk does not have a body shop. The risk does not engage in any towing operations. However risk does have an official roadside assistance service provide by the dealer ship.

a. Risk – the probability of a negative/harmful effect from a hazard or hazardous situation or the potential for the recognition of undesirable adverse consequences from future events.

Identifying all of a firms risks is an intricate process. The process involves all stakeholders associated with the company. It is part of the overall workflow associated with a risk management system which is discussed later in Figure 1.2 of the text. When determining risks, the first step is to conduct an initial enterprise wide risk assessment and action plan. According to Risk Management for Enterprises and Individuals, risks across most business fall into four overarching categories, which are:

A risk is the possibility of an event or condition that would have a negative impact on a project. A risk can be nearly anything. It can be the upcoming performance of an activity that has never been performed before, and therefore the outcome or duration is very uncertain. It can be the potential loss of a key project personnel resource to another project. It can be the unknown status of funding from the customer side for an upcoming phase of the project. Or it can be the use of a new technology for the overall solution or for accomplishing specific tasks on the project.

Risk is a part of everyday life and it is something we all must learn to cope with and manage. According to Cohen and Palmer (2004), “Risk is simply the potential for complications and problems with respect to the completion of a task and the achievement of a goal” (p. 1). In project management and the project life cycle, risk is also present. Risk is a part of every project and cannot be completely avoided (Ramgopal, 2003, p. 21). However, risk is something that can be identified, evaluated, and managed within a project. This important risk identification and management process that takes place throughout the project life cycle is a process that should not be avoided or ignored. “Effective project risk management has three fundamental steps:

Banc One’s overall strategy of risk management is to stay within a permissible limit of earnings sensitivity. Based on the last meeting, it was decided that for 50 basis points increase (average over a year) in the interest rates, the level of earnings change should not be more than 4%. Banc One also used a balancing portfolio for asset-liability management, which consisted of investments in conventional securities and derivatives with an underlying mandate to achieve a reasonable rate of return, fulfill short term liquidity needs, manage interest rate exposure, and maintain a modest regulatory capital obligation. Also, Banc One has recently shifted its focus to synthetic instruments owing several advantages these new securities present.

All projects are subject to the effects of uncertainty. The uncertainty creates the need for organizations to be aware of the many different types of risk they will be challenged with for the duration of the project. To understand the level of risk the organization must have a defined process for project risk management to include their risk appetite, risk tolerance and risk thresholds. Project Risk Management is the processes of conducting risk management planning, identification, analysis, response planning, and controlling risk on a project. (PMI, 2013, p. 555). The PMBOK Guide lists six processes of Project Risk Management as “Plan Risk Management, Identify Risks, Perform Qualitative Risk Analysis, Perform Quantitative Risk Analysis, Plan Risk Responses, and Control Risks” (PMI, 2013, p. 309). Risk management planning has been identified as an important management approach to dealing with uncertainty in projects, aiming to minimize threats and increase opportunities. Understanding each of these processes will give you a clear picture of the importance that risk management plays within a project.

Aside from uncertainty, the common word in all these terms is the word risk. Risk is covered by many definitions according to the context that it is used in. Some definitions are:

Systematic risks are risks one cannot avoid such as market risk, interest rate risk, currency risk,

Typically companies have a higher tolerance for financial risks than operating risks. Financial risks include risks associated with foreign exchange rates, liquidity, credit decisions and the operating risks include risks associated with supply chain, information technology. Financial risks are generally easier to quantify and control as compared to operating risks, many of which are due to being influenced by external factors out of a company’s control. (Compliance week, 2008) The process of risk management has been greatly influenced by the evolution of financial markets and institutions. Over the last decade the financial market has undergone swift and philosophical changes. As the market progressed, the changes in our financial