She completed her Master of Business Administration, concentration in Risk Management and also holds a Bachelor of Business Administration (hons.) insurance from Universiti Teknologi MARA. Apart from teaching, she holds various administrative positions and is currently a committee member for Risk Management and Chances of Politeknik Kota Bharu.
NATURE OF RISKS
Risk and Uncertainty
Risk versus Uncertainty
Cost Of Risk
Peril, Hazard and Loss
Risk is the possibility of loss and danger is the cause of damage or loss. Loss can be defined as a reduction or disappearance of economic value and can be measured in monetary terms.
Risk Tolerance
In a world that is changing really fast, the only strategy that is guaranteed to fail is not.
Tutorial Questions 1
Failure to manage risk will result in more problems, higher benefits, and a higher chance of project success.
FUNDAMENTALS OF RISK MANAGEMENT
Risk Management
Definition of Risk Management
Objectives of Risk Management
Role & Methods of Risk Managers
Risk Manager
This allows the company to prioritize its investments and reduces internal disagreements about how the money should be spent.
Risk Management Process
Risk Management Standard
ISO International Organization for Standardization
The risk management framework and process are adapted and proportionate to the external and internal context of the organization related to its objectives. Risk management anticipates, detects, confirms and reacts to these changes and events appropriately and in a timely manner.
Tutorial Questions 2
Facilitate effective interaction between risk manager and senior management b. Delegate work of risk management between company branch. ISO is the main card companies and banks divide the merchants who accept their cards into categories and give each merchant accordingly a corresponding code consisting of four numbers.
RISK IDENTIFICATION
Risk Identification
Classification Of Risk
Pure and Speculative Risks
Fundamental and Particular Risks
Types Of Pure Risk
- Personal Risks
- Property Risks
- Liability Risks
- Financial Risks
Amir will need additional expenses in the form of the cost of renting a temporary workshop while his workshop is being repaired. Liability risks are the risks that another person will be sued for a negligent or wrongful act that caused bodily injury or property damage to another person. Let's say Ayesha was driving late at night after being tired from work.
Changes in inflation and the real value of stocks and bonds owned by individuals can affect the value of their financial assets. For example, fluctuations in the prices of commodities such as palm oil can result in price increases and decreases in supply of related products.
Tools Of Risks Identification
- Physical Inspections
- Flowcharts
- Checklists
- HAZARD and Operability Studies (HAZOP)
- Fault and Logic Tree Analysis
- Interviews
- Analysis of Financial Statements
A risk checklist is one of the powerful tools in businesses as it can keep track of business experiences, tasks and deadlines, apart from ensuring that all daily, weekly and monthly tasks are completed on time. The Hazard and Operability Study (HAZOP) is a form of detailed research used to identify potential hazards and operational problems in terms of process industries, especially the chemical industry, plant design and human error. Fault Tree Analysis (FTA) or Logic Tree Analysis (LTA) is a systematic and development of logical factors that contribute to any fault or unwanted event.
This technique will also help make the project's risk identification process easier and more accurate. Risk manager can analyze the risks and loss exposure through company's balance sheet and income statement as it shows clues about income or if there is any business interruption. The essence of risk management lies in maximizing the areas where we have some control over the outcome while minimizing them.
Tutorial Questions 3
A risk is when the probability is low and the impact of loss is high, which shows that risk management tool should be used if:.
RISK MEASUREMENT AND ANALYSIS
Risk Measurement and Analysis
Risk Matrix
As part of the risk management process, companies use risk matrix to help them prioritize different risks and develop an appropriate mitigation strategy.
The Measurement of Probability
- Mutually Exclusive Events
- Compound or Joint Probability Outcomes
- Expected Value
- Variance and Standard Deviation
For non-mutually exclusive events, there is a probability that at least one of the two outcomes will occur, or that both events can occur simultaneously. The probability that event A or B will burn down, assuming that the probability of factory A burning + the probability of factory B collapsing – the probability of A and B happening. Independent outcomes is a situation in which the occurrence of outcome A does not affect the probability of outcome B.
Another example is, there is fire at factories in Kok Lanas (factory A) and Pengkalan Chepa (factory B). The probability that dependent events A and B occur together is P(A and B) = P(A) × P(B given A) where P(B given A) means the probability of event B given the occurrence of event A. If there are two distinct outcomes such as house A and house B set on fire, the probability that both outcomes will occur is determined by multiplying the probability of A by the probability of B, given that A has occurred.
The expected value is also known as the expectation, mathematical expectation, EV, mean, average value, average or first moment. The expected value can be used to calculate loss frequency and loss severity denoted as E[X]. There are two ways to calculate the expected value either using probability (𝑝) or frequency (𝑓) of distribution.
Tutorial Questions 4
RISK MANAGEMENT TECHNIQUES
Risk Management Techniques
Risk Control
For example, a car is regularly inspected for mechanical problems to avoid engine failure or mechanical failure and reduce the frequency of accidents. Employers must ensure that their employees wear and use any protective equipment or clothing available under Section 24 of the Occupational Safety and Health Act (OSHA) of 1994. For example, a company should install fire extinguishers to reduce severity of loss or damage caused by fire in the building.
Another example is the separation or dispersion of the company's assets will limit the extent of losses to occur, regardless of whether it will not reduce the number of fires or explosions that may occur. Wearing seat belts while traveling in a car or plane can also help reduce impact or injury.
Risk Financing
This method is recommended when no other risk management technique is available and losses can be accurately predicted. i) Captive insurers. Captive Insurance is a licensed insurance company formed by a non-insurance company (parent company) to insure the parent company's risk. Risk transfer refers to transferring risk to another party to minimize the impact of losses.
Insurance is the contractual transfer of risk from one party (the insured) to the other (the insurance company) for the exchange of premiums. The transfer of risk to the insurance company means that the insurance company is obliged to pay for the losses caused by the risk under the insurance contract. ii) No Insurance. There are two types of risk transfer for non-insurance measures which is a protective and hold harmless arrangement.
Hedging is an agreement to buy or sell a commodity at a certain price to avoid losses due to price increases or decreases due to fluctuations by entering into futures contracts. A hold harmless arrangement is a risk transfer measure where one party assumes responsibility for another person's loss. For example, an agreement between the retailer and the manufacturer will release the retailer from any liability for the manufacturer's defective product.
Selection & Implementation of Risk Management Techniques
Monitoring And Reviewing The Risk Management Programme
Tutorial Questions 5
It is used to set capital requirements taking into account the size and degree of risk the company is taking.
RISK MANAGEMENT PROGRAMME
Fire Risk
Property Risk
Liability Risk
Enterprise Risk
International Trade Risk
Documentation risk is the risk of non-compliance with specific documentation requirements under a sales contract or documentary credit. Failure to comply with documentation requirements may result in Seller's inability or delay in receiving payment for goods delivered or service rendered. Economic risk refers to unfavorable economic conditions in the country of the buyer or seller, which may affect both parties in fulfilling their obligations.
On the buyer's side, the economic risk may result in the buyer's insolvency or inability to accept the goods or services. The inability to appreciate/accept cultural differences and/or language barriers may lead to conflict and failure to complete the sales agreement. Interest rate risk is the risk borne by an interest-bearing asset, such as a variable rate loan.
An increase in the interest rate will result in the buyer or seller paying more interest on their variable rate loan. Political/sovereign risk refers to the complications that the buyer or seller may be exposed to due to adverse political decisions or political changes that may change the expected outcome of an outstanding contract. Transit risk is the risk of damage to goods during delivery from the country of origin to the country of destination.
Online Fraud Risk
Viral the issue to the public to increase their awareness towards the fraud and thereby reduce the number of crimes.
Cyber Security Risk
Fidelity Risk
Burglary Risk
Trim the bushes and vegetation and move rubbish from around the house so they have nowhere to hide.
Work Place Risk
Tutorial Questions 6
It is also used to ensure that these devices and data are not misused. B. any event or action that could cause loss or damage to the buyer or supplier in international trade. The increase in export market is very beneficial for an economy, but on the other hand, the increase in imports can pose a threat to the economy of that country. C. any aspect of the work that presents health and safety risks and is potentially harmful. D. risk that may involve a third party who may be held responsible for certain types of losses and sued for bodily harm or other damages. Keep the property in the locked safe or safe to avoid the risk of theft.
Installation of CCTV and alarm warning systems to warn people about theft and reduce the loss of victims. PETALING JAYA (THE STAR/ASIA NEWS NETWORK) - The fire at the building housing Malaysia's largest pension fund EPF in Selangor on Tuesday (Feb 13) was caused by a spark that ignited a panel of flammable cladding on the exterior of the building, an elderly fire department official said. Fire and Rescue Services Department deputy director-general Soiman Jahid said the fire started on the first floor of the six-storey Employment Provident Fund (EPF) building in Jalan Gasing in Selangor while maintenance work was being carried out on the exterior of the building. .
Ainon Basar, Ang Chung Hwa, Hayati Mohd Dahan, Tan Liam Seng, Yon Bahiah Wan Aris, Zuriah Abdul Rahman.
