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Risk Management

Risk- Uncertainty of occurrence of any

unforeseen event

Pure Risk- Always leads to lossSpeculative Risk- May Result in loss or Gain

Static Risk- Results in loss

Dynamic Risk- May Result in loss or Gain

Commercial Trade Risk

Insurable Risk

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Types of Risks

Material Risk- Building,Plant &

Machinery,Furniture,Fixtures,fittings,Stocks.

Consequential Risk- Loss of production,Lossof profit,Loss of market,Good will.

Social Risk

Legal Risk- Product liability,Public liability.

Political Risk- Subsidies,Sanctions etc.

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Risk ManagementEconomic protection of Companys Assets,

Earnings & Liabilities.

Risk Management Process

Identification of RiskVarious Methods

Some are Quantitative,Some are Qualitative

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Risk Evaluation

Arrange them in order of priority

Provide information for deciding the

most appropriate way of handling.Ranking risks according to :

1. Frequency of loss ; and

2. Potential severity of loss.

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Risk Analysis

Risk and Human behavior looks into

psychology of risk.

How others look at the risk? How they behave in the face of risk?

How they behave in groups?

Perception of Risk.

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Risk analysis is to be carried out with proper

perception of risk of risk and cost involved in

Analysis.

Not to stick to one method

Understand company and industry

Should be financially reasonable

Accurate record keeping

Amount of imagination of required

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Risk Reduction / Loss Prevention

Reduce probability of loss and its severity.

Most important for RM process.

Risk Reduction / Prevention can be fromLoss prevention

Safety

Fire protection / Detection

Environmental protection

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Risk Retention If,

Charge losses against normal operation cost.

Contingency fund.Borrow the cost of any loss, repaying over

agreed period.

Risk Transfer : To insurersPure risks

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Risk ManagementCommon

Sense

Disproportionate Emphasis on Risk Finance

like

Self Insurance AlternativesNon-Insurance option of Retention

Assumption of Loss by Numerous

Techniques

But not much attention on Loss prevention,

Safety and Loss control

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Risk Management

On going plan to avoid circumstances and

events that can cause loss & Minimize the

operational and financial impact of loss,

should it occur.

Thus it includes loss prevention and lossfinance:

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Mom and Pop

Business

Large Risk

Light at night to

prevent Burglary

Burglary Alarms,

Surveillance,Petrols, Electronic

Sensors

House Keeping House Keeping

Loss Finance from

Insurance Proceeds

Loss Finance from

Insurance Proceeds

Withdrawal of

savings

Surplus (Savings)

Loan from Banking Loan from Bank

Thus, Risk Management principals for small and large risks are moreor less same.

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Risk Management

It involves Insurance But is more than

Insurance

It is specified part of financial managementbut is more than that

It may require knowledge of chemical

processes, Fundamentals of Fire Engg.Physical properties of Different materials But

is more than that

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Risk Management

Requires Statistical Techniques But is more

than Loss Statistics

Thus RM involves Multi-DisciplinaryApproach.

Insurance Managers, Fire Engineers,

Statisticians and the like are Dealing withmany Aspects of Risk But no one takes overall

view of Risk.

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Risk Management

Risk Manager should look into overall view

of the risk.

Co-ordinate with various Line Managers to

get the same.

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Sources of Ignition

The main sources of ignition involved in almost allindustries are:

Smoking

Heat of Cutting

Spontaneous Oxidation from Grinding

Welding

Cutting

Hot surfaces such as furnaces etc.

Electrical sparkingArching

Impact ignition

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Risk Exposure DataWhat to Look for ?

Layout of the Plant.

Interconnectivity of roads/ accessibility.

Proximity to Fire Stations/ Police Station/ Hospital.

Condition/ location and number of Emergency Exits/ Stairs/

Gates.

Earthquake Exposure of the Buildings.(Seismic Zone)

Flood/ Inundation Exposure.

Landslide/ Rockslide Exposure.

Terrorism Exposure.

Proximity to Water BodiesRiver, Lake, Sea, Drains etc.

Internal & External Drainage System.

Congestion at the Site.

EmployeeEmployer relations (Industrial Relation)

Type of labour employedyoung/ matureskilled/ unskilled..

Condition of Raw/ Process/ Intermediate & Finished Materials

storedFlammable/ Hazardous.

Major Changes in the future/ near past.

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Risk Exposure DataWhat to Look for ?

Neighboring occupancies & their exposure.

History of Natural disasters/ AOG PerilsFlood/ Eq./ Landslide/

Storm etc.

General law & order & political situation in the area.

Terrorism exposure in the area.

Adherence to No Smoking Regulation.

Installation of FEAstheir adequacy and placementtheir

maintenance.

General Awareness of the employees and their training regarding

FEA appliances installed/ their usage.

Presence of Trained full time Safety & Fire Officers & Staff.

ISO Certifications

SHE policy/Maintenance philosophy

Enforcement of work permit system (Hot/ Cold /electrical/at

heights etc.)

General housekeeping (Orderliness and cleanliness.)

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Risk Exposure DataWhat to Look for ?

Management awareness & involvement in safety and

security matters.Quantity and quality of security staff..

Regulation of entry and exit of persons, vehicles, trucks &

materials.

Source of water and quantity of storage facility.

Condition of electrical wiring and installations.

Condition of machinery, their maintenance, hazards

involved with them, presence of qualified personnel to

handle them.

Condition of electrical equipment, their maintenance and

presence of qualified personnel to handle them.

Condition of Buildings & their construction.

Condition and construction of Boundary Wall.

Exposed openings and presence of combustible materials.

Quantity of Fire load.Presence of forest/ bushes/ ve etation in the vicinit .

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