Modern Risk Management

Mr. Sarbesh Mishra,

Assistant Professor,
Finance, NICMAR.
 About Myself
Name : Mr. Sarb es h M ishra.

Qualifications :

Experience : Joined University of Delhi as a

Lecturer in Commerce in 2001 and
continued till 2005 and then joined Army
Institute as Senior Faculty, Finance
prior to current appointment at NICMAR.

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Risk Management

Risk Management is defined as “the

process whereby organizations
methodically address the risks
attaching to their activities with the
goal of achieving sustained benefit
within each activity and across the
portfolio of each activities”
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Contd….

The objective of risk management is defined

as, “to add maximum sustainable value to
all the activities of the organization”.

Risk Management “increases the probability

of success, reduces the probability of
failure and the uncertainty of achieving the
organization’s overall objectives”
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Risk Management Process
Organization's strategic objectives

Risk Assessment
Risk analysis: F
M •Risk identification
O O
•Risk description R
D •Risk estimation
I M
•Risk evaluation A
F
I L
Risk reporting
C
A A
Decision U
T
I D
O Risk Treatment I
N T
Residual Risk Reporting

Monitoring
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Organization's Strategic Objectives

Risk management protects and adds

value to the organization and its
stakeholders through supporting the
organization's objectives by,

 Providing a framework for an organization

that enables future activity to take place in
a consistent and controlled manner.
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Contd….
 Improving decision making, planning and
prioritization by comprehensive and
structured understanding of business
activity, volatility and project opportunity /
threat.
 Contributing to more efficient use /
allocation of capital and resources within
the organization.

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Contd….
 Reducing volatility in the non-essential
areas of the business.
 Protecting and enhancing assets and
company image.
 Developing and supporting people and
organizations knowledge base.
 Optimizing operational efficiency.

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Risk Assessment

Risk assessment is defined as, “the

overall process of risk analysis and risk
evaluation”

3. Risk Identification
4. Risk Description
5. Risk Estimation

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Risk Treatment
Risk treatment is defined in the standard as, “the
process of selecting and implementing
measures to modify risk”.
It includes:
 Risk Avoidance
 Risk Control
 Risk Transfer
 Risk Financing

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Risk Reporting
1. Board of Directors
2. Business Units
3. Individuals
4. Stakeholders
“The arrangement for the formal
reporting of risk management should be
clearly stated and be available to the
stakeholder”.

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Risk Monitoring
 Risk Management should be subject to
regular monitoring and independent audit.

This is to ensure that “risks are effectively

identified and assessed and appropriate
controls and response are in place”

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Structure and Administration
 To be effective, the process needs
commitment from the Chief Executive.
 An organization should have a appropriate
risk management policy setting out its
approach to risk and its management.
 The board has responsibility for creating
an appropriate environment and structure
for risk management to operate effectively.
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Contd.
 Business units have the main
responsibility for day to day management
of risk.
 The risk management function, which may
range from a large department down to a
single person, has an advisory,
coordination and reporting role. Its should
not have the main responsibility for
managing the risk.
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 THANK
YOU

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