Risk Management

RISK MANAGEMENT

By: Fiza Badar.

CONTENTS

Definition Steps in risk management Risk assessment Risk levels Risk evaluation Risk measurement Reviews Risk in banking Conclusion

DEFINITION

Risk management is a logical process or approach that seeks to eliminate or at least minimize the level of risk associated with a business operation.

Essentially, the process identifies any type of situation that could result in damage to any resource within the possession of the company, including personnel , then take steps to correct those factors that are highly likely to result in that damage.

STEPS IN RISK MANAGEMENT

1. RISK ASSESSMENT

A risk assessment is simply a careful examination of what, in your work, could cause harm to people, so that you can weigh up whether you have taken enough precautions or should do more to prevent harm.

It not only helps one to evaluate the risk but also help in measuring and reviewing the risk. Assessment of risk identify also the nature of risk associated.

RISK LEVELS RISK LEVEL

MISSION EFFECTS

Extremely high Mission failure is hazardous.

High Degraded mission capabilities.

Moderate Expected degraded capabilities.

Low Expected losses have no impact on mission success.

2. RISK EVALUATION

Once you have identified the threats you face, the next step is to work out the likelihood of the threat being realized and to assess its impact.

One approach to this is to make your best estimate of the probability of the event occurring, and to multiply this by the amount it will cost you to set things right if it happens. This gives you a value for the risk.

3. MANAGING RISK

Once you have worked out the value of risks you face, you can start to look at ways of managing them.

When you are doing this, it is important to choose cost effective approaches - in most cases, there is no point in spending more to eliminating a risk than the cost of the event if it occurs.

4. REVIEWS

Once you have carried out a risk analysis and management exercise, it may be worth carrying out regular reviews.

These might involve formal reviews of the risk analysis, or may involve testing systems and plans appropriately.

RISK MANAGEMENT IN BANKING

In the course of their operations, banks are invariably faced with different types of risks that may have a potentially negative effect on their business.

Banks are therefore required to form a special organizational unit in charge of risk management.

RISK MANAGEMENT IN BANKING

Following are the risks that are faced by the banks:

1) Liquidity risk2) Credit risk 3) Market risk4) Exposure risk5) Investment risk

CONCLUSION

We live in a world that is full of risk, large degree have created ourselves, and where naturally occurring risk hardly exists anymore.

THANK YOU