*Risk Management

*What is Risk?Risk arises from uncertainty; but all uncertainties do not carry risk.Possibility of an unfavorable outcome of an uncertainty is risk.Outcome of an uncertainty may even be favorable. Is that a risk? In certain cases, yes.

*Why take risks?Because you have to.Because it brings rewards.Risk Aversion

*Risk Management ProcessRisk Identification / ExposureRisk AssessmentSelection of risk management techniquesImplementationReview

*Risk IdentificationRisk profile of a companyFormal listing of all potential risks.External professional helpRisk is inevitable; however unfavorable consequences of risk can be controlled.Degree of risk to be assumed

*Classification of RiskProduction riskPrice risk of inputs / outputsReputational risk Project riskEnvironmental risk (weather)Political riskEconomic conditions risk

*Risk AssessmentHaving listed all the potential risks, ask:How likely is it for any of these risks to actually materialize?What is the maximum possible loss that can arise from each of the listed situations?Can you stand that loss?

*Risk Management TechniquesRisk avoidanceLoss prevention and controlInternal controlsRisk retentionRisk transfer

*Risk Transfer ModesHedgingOptionsInsuranceDiversification

*Implementing the PlanGet quotes, find the best provider and create a contract.Keep reviewing the situation.Keep revising your risk profile.Keep a record of cost of risk transfer against benefits of risk transfer.Amend plans as necessary.

*Is risk management a Corporate Governance issue?Board is responsible for protection of company assets.Board must work to improve shareholders value, which is not possible without taking some risks.Not taking risks may be the biggest risk.

*Risk Management ReportingCC of CG requires:Audit Committees ReportBoards Statement on Internal Controls

*Audit Committees ReportList significance risks; how they are being identified, assessed and managed.Report on effectiveness of the systems put in place to manage these risksList of actions being taken to remedy significant failings or weaknessesComment on need for greater monitoring of procedures

*Boards Statement onInternal ControlEssentially it is about status of internal controls, e.g.There is an ongoing process for identifying, evaluating and managing significant risks.That the process was there during the year under report.It is being regularly reviewed by the Board.It is in accordance with Turnbull Guidance

*Turnbull ReportRisk AssessmentControl EnvironmentControl ActivitiesInformation and CommunicationMonitoring

*Risk AssessmentClear objectives, clearly communicated to all concerned.Significant risks assessed regularlyMarket risksTechnological risks (H&S, Environment)Credit and liquidity risksReputational risks, legal risksClear understanding of risks being retained

*Disaster Recovery PlansDisasters happen, or are made to happen.What plans does a company have to ensure that:Its operations are restored quicklyIts data is not lostMost important for financial institutions

*Thank you

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