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RISK MANAGEMENT - A BALANCING ACT

RISK MANAGEMENT - A BALANCING ACT. CHOLAMANDALAM MS RISK SERVICES LTD., Chennai. RISK MANAGEMENT - A COMBINATION OF SCIENCE & ART. CHOLAMANDALAM MS RISK SERVICES LTD. Investigation & understanding the broad range of risks in relation to the organization's objective.

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RISK MANAGEMENT - A BALANCING ACT

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  1. RISK MANAGEMENT - A BALANCING ACT CHOLAMANDALAM MS RISK SERVICES LTD., Chennai

  2. RISK MANAGEMENT - A COMBINATION OF SCIENCE & ART CHOLAMANDALAM MS RISK SERVICES LTD.

  3. Investigation & understanding the broad range of risks in relation to the organization's objective Development of the ability to communicate, articulate and manage the identified risks RISK (Science) & Management (Art) “Today’s total Risk Manager is the person who can combine art with science to master the challenges & opportunities of a fast-changing world”

  4. RISKS- A Fact File • The word, Risk has been derived from the Latin word, ‘Risicare’, which means ‘dare’ • The lexicon defines Risk as threat or vulnerability • Risk Management (RM) emerged basically as a financial discipline • RM is popular analytical method for optimizing insurance coverage • RM is globally 50 years old

  5. RISK is a difficult concept to define!!!! And interestingly, (Risk is generally perceived with negative effects but it also signifies opportunity & growth)

  6. Types of Risks • Financial Risks • Operational Risks • Physical Risks • Strategic Risks • Reputation Risks • Business Risks

  7. Ideal Risk Management • Holistic • Dynamic (Pro-Active) • Cost-Effective (CBA) • Quantifiable

  8. RM Scenario in India • Still in its infancy • Mostly practiced in the Financial & Insurance sectors • BCP (Business Continuity Planning) gaining importance in IT dependent industries

  9. 71% of the responders have no BCM plan 94% felt that BCM should address IT hardware & software Risks 30% are developing a BCM plan 31% have a documented & tested BCM plan 39% felt that the primary driver (PD) for BCM initiative is criticality to business 2% felt that PD for BCM is past experience!!! BCM (Business Continuity Management)-Indian Trends * Excerpts from a latest KPMG survey on ‘BCM Preparedness in Indian Industries, 2002’

  10. Insurance & Risk Management • Insurance could be part of a comprehensive RM (Risk Financing) plan • A good risk means a healthy bottomline to both the insured and the insurer • It is logical that the insurer promote loss control programme for insured as part of their BCP (Business Continuity Plan) “For every 1 rupee insurance, there is 8 rupee non-insured losses”

  11. SEPTEMBER 11 DISASTER • Total loss-40 BN US$ • Very low event probability, but very high severity • None of the Risk Management efforts helped Due to tested & effective BCP in place, many companies were able to continue their business operations • INSURABILITY PROBLEMS: • Catastrophic risk • Probability distribution of possible events could not be assessed due to absence of past experience

  12. “Retention of Risk is Business” “No business can be run after eliminating all risks ” RISK RETENTION/ TRASFER IS FINALLY A TOP MANAGEMENT JUDGEMENT

  13. RM can be used as an effective tool to guarantee a systematic, transparent and future-oriented corporate governance

  14. RISK MANAGEMENTisan Attitude! Cholamandalam MS Risk Services Ltd. Chennai inquiry@cholams.murugappa.com www.cholarisk.com

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