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    Chapter 2 - Principles and Aims of Risk Management

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    This document outlines the principles and aims of risk management. It defines risk management as identifying exposures and selecting treatment techniques. The objectives are to prepare for losses economically, reduce anxiety, and meet legal obligations. Key aims after a loss are firm survival, continued operations, stable earnings, and growth. Risk management should be proportionate, aligned with business activities, comprehensive, embedded in processes, and dynamic. It delivers compliance, risk oversight, risk-informed decisions, and efficient operations. The importance is better decision-making, stakeholder assurance, and accurate performance reporting. Specialist areas include project, medical, energy, and operational risk management. Frameworks and tools help manage hazards, controls, and opportunities.

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    Chapter 2 - Principles and Aims of Risk Management

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    This document outlines the principles and aims of risk management. It defines risk management as identifying exposures and selecting treatment techniques. The objectives are to prepare for losses economically, reduce anxiety, and meet legal obligations. Key aims after a loss are firm survival, continued operations, stable earnings, and growth. Risk management should be proportionate, aligned with business activities, comprehensive, embedded in processes, and dynamic. It delivers compliance, risk oversight, risk-informed decisions, and efficient operations. The importance is better decision-making, stakeholder assurance, and accurate performance reporting. Specialist areas include project, medical, energy, and operational risk management. Frameworks and tools help manage hazards, controls, and opportunities.

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    Chapter-2_Principles-and-aims-of-risk-management

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    This document outlines the principles and aims of risk management. It defines risk management as identifying exposures and selecting treatment techniques. The objectives are to prepare for losses economically, reduce anxiety, and meet legal obligations. Key aims after a loss are firm survival, continued operations, stable earnings, and growth. Risk management should be proportionate, aligned with business activities, comprehensive, embedded in processes, and dynamic. It delivers compliance, risk oversight, risk-informed decisions, and efficient operations. The importance is better decision-making, stakeholder assurance, and accurate performance reporting. Specialist areas include project, medical, energy, and operational risk management. Frameworks and tools help manage hazards, controls, and opportunities.

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    Download as pdf or txt
    34 views19 pages

    Chapter 2 - Principles and Aims of Risk Management

    Uploaded by

    dokterlabsss post
    This document outlines the principles and aims of risk management. It defines risk management as identifying exposures and selecting treatment techniques. The objectives are to prepare for losses economically, reduce anxiety, and meet legal obligations. Key aims after a loss are firm survival, continued operations, stable earnings, and growth. Risk management should be proportionate, aligned with business activities, comprehensive, embedded in processes, and dynamic. It delivers compliance, risk oversight, risk-informed decisions, and efficient operations. The importance is better decision-making, stakeholder assurance, and accurate performance reporting. Specialist areas include project, medical, energy, and operational risk management. Frameworks and tools help manage hazards, controls, and opportunities.

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    PRINCIPLES AND AIMS OF

    RISK MANAGEMENT
    Hopkin, Paul (2010), Fundamentals of Risk
    Management, Philadelphia: Kogan Page
    Limited.
    Definition of Risk Management
    • It is a process to identify loss exposures faced by an
    organization and to select the most appropriate
    techniques for treating such exposure
    • In the past, risk managers only considered pure loss
    exposures  today, managers consider certain speculative
    risks
    Objectives of risk management
    1. Pre-loss objectives
    a) The firm should prepare for potential losses in the
    most economical way analysis of cost of safety
    program, insurance premium paid, and costs
    associated with the different techniques for handling
    losses
    b) Risk managers aims to reduce of anxiety  certain loss
    exposure can cause greater worry and fear for the risk
    managers
    c) Risk managers aims to meet any legal obligation 
    government regulation may require a firm to install
    safety devices to protect workers from harm
    Objectives of risk management
    2. Post-lost objectives
    a) Survival of the firm  after a loss occurs, the firm can resume
    at least partial operations within some reasonable time
    period
    b) Continue operating  the ability to operate after a loss is
    extremely important. A public utility firm must continue to
    provide service  otherwise, business will be lost to
    competitors
    c) Stability of earnings  EPS can be maintained if the firm
    continues to operate. However, a firm may incur substantial
    additional expenses to achieve this goal, ex. to operate at
    another location and perfect stability of earnings may not be
    attained
    d) Continued growth of the firm  a company can grow by
    developing new products and markets or by acquiring or
    merging with other companies
    Principles of risk management
    What risk management should be:
    1. Proportionate to the level of risk within the organization
    2. Aligned with other business activities
    3. Comprehensive, systematic, and structured
    4. Embedded within business processes
    5. Dynamic, iterative, and responsive to change

    The approach to risk management is based on the idea that


    risk can be identified and controlled
    Key part of risk management improved organizational
    decision making
    What risk management should deliver?
    1. Compliance with laws and regulations
    2. Assurance regarding the management of significant risks
    3. Decisions that pay full regard to risk considerations
    4. Efficiency, effectiveness, and efficacy in operations,
    projects and strategy

    The outputs from risk management will lead to:


    1. Less disruption to normal efficient operations
    2. Reduction of uncertainty in relation to change
    3. Improved decisions in relation to evaluation and selection
    of alternative strategies
    Importance of risk management
    1. Better decision making & improved efficiency
    2. Provision of greater assurance to stakeholders
    a. Directors of organization need to be confident that risk
    have been identified
    b. Appropriate steps have been taken to manage risk to an
    appropriate level
    3. Create accurate reporting of information on company
    performance, including risk awareness
    Risk management activities
    Specialist areas of risk management
    1. Project risk management
    2. Clinical/medical risk management
    3. Energy risk management
    4. Operating risk management

    Risk management tools and techniques should be brought to


    achieve the following:
    1. Hazard management makes outcomes less negative
    2. Control management reduces the spread of possible
    outcomes
    3. Opportunity management makes outcomes more positive
    Risk management standard
    Risk management framework

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