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RISK AND INSURANCE MANAGEMENT

ASSIGNMENT

PREPARED BY, SANTHOSH.K IIND MBA

TOPIC

CORPORATE RISK MANAGEMENT PROCESS

INDEX
NO 1. 2. 3. 4. 5. PARTICULARS BIBLIOGRAPHY LIST OF ABBREVIATIONS SUMMARY INTRODUCTION CORPORATE RISK ASSESSMENT PAGE NO 4 5 6 7

6. 7.

CORPORATE RISK ANALYSIS CONCLUSION

8,9 9,10 11

BIBLIOGRAPHY
BOOKS

1. WEBSITES 1. http://en.wikipedia.org,dated 09-10- 2011

LIST OF ABBREVIATIONS

SUMMARY OF TOPIC

CORPORATE RISK MANAGEMENT

Corporate risk management is the practice by which a company or corporation identifies the risks involved in running its business and attempts to either eliminate them or mitigate their severity. The key to this process is making preparations for a disastrous event before it takes place so that operations will not be interrupted should the worstcase scenario occur. In terms of corporations that do business involving large amounts of money, corporate risk management concerns the efforts to take precautions against sudden calamities. This has become an increasingly important enterprise as regulatory bodies have cracked down on corporations that place themselves at high degrees of financial risk.

Methods of corporate risk assessment

Corporate risk assessment is a process that seeks to identify the potential liabilities associated with making certain decisions within the operation of a business. Considered an important component in the process of risk management, the goal is to ascertain if the possible drawbacks or risks associated with a given action or decision are offset by the potential benefits gained by that same activity. There are actually several different approaches to corporate risk assessment that are in common use, including assessing risk associated with internal, external, and financial investment decisions.

INTRODUCTION
Corporate risk refers to the liabilities and dangers that a corporation faces. Risk management is a set of procedures that minimizes risks and costs for businesses. The job of a corporate risk management department is to identify potential sources of trouble, analyze them, and take the necessary steps to prevent losses. The term "risk management" once only applied to physical threats like theft, fire, employee injuries and car accidents. By the end of the 20th century, the term came to apply also to financial risks like interest rates, exchange rates, and e-Commerce. These financial risks are the most applicable type to corporations. There are several steps in any risk management process. The department must identify and measure the exposure to loss, select alternatives to that loss, implement a solution, and monitor the results of their solution. The goal of a risk management team is to protect and ultimately enhance the value of a company. Corporate risk management is the practice by which a company or corporation identifies the risks involved in running its business and attempts to either eliminate them or mitigate their severity. The key to this process is making preparations for a disastrous event before it takes place so that operations will not be interrupted should the worst-case scenario occur. In terms of corporations that do business involving large amounts of money, corporate risk management concerns the efforts to take precautions against sudden calamities. This has become an increasingly important enterprise as regulatory bodies have cracked down on corporations that place themselves at high degrees of financial risk. One of the ways that corporate risk management is achieved is through the use of risk modeling. Risk management experts can create models that identify all of the possible events that could damage a company, whether they are financial problems or legal issues. They can then assess the damage that would ensue should one of these events actually come to fruition. Knowing the damage involved with each potential problem allows the corporation to allocate resources to each problem area commensurate with the severity of the potential damage.

Corporate risks come in a number of different types. Some have to do with the internal function of the business, while others are concerned with external factors that could have some sort of negative impact on the profitability of the business in the short of long-term. Identifying these types of corporate dangers and developing strategies to minimize the impact is a key function in risk management, Internal corporate risks often revolve around the business model of the company itself. Here, the corporate risk management department will seek to identify anything inherent in the way the company operates that could present a measurable risk to the financial stability of the business. The scope of corporate risks will vary, based on the size and structure of the business involved. Risks inherent to the operation of a multinational company will be more varied than those faced by a small company operating with a single location. In every case, care should be taken to identify risks relevant to how the company functions and make sure plans are formulated to contain those risks, allowing the business an opportunity to grow.

CORPORATE RISK ASSESSMENT

Corporate risk assessment is a process that seeks to identify the potential liabilities associated with making certain decisions within the operation of a business. Considered an important component in the process of risk management, the goal is to ascertain if the possible drawbacks or risks associated with a given action or decision are offset by the potential benefits gained by that same activity. There are actually several different approaches to corporate risk assessment that are in common use, including assessing risk associated with internal, external, and financial investment decisions. Internal corporate risk assessment is a broad approach that tends to focus on issues that impact the overall operation of the business model. This will include reviewing how the production floor is arranged, how well the business is doing in terms of compliance with governmental and industry safety standards, and even how finished goods are stored while awaiting shipment. Here, the goal is to make sure that the operational processes that lead to the companys chief means of revenue generation are as efficient and as practical as possible. External corporate risk assessment has to do with how the decisions of owners and managers affect those outside the operation. This includes activities such as assessing the safety of the packaging used for finished goods, and what issues the packaging could present for consumers. In like manner, the impact of the

business operation on the local economy and even how the operation of plant facilities affects the local environment may be involved. Essentially, the idea is to determine if decisions are being made that could create issues for the wider community and in turn have an adverse effect on the company itself. Financial corporate risk assessment will typically focus on what type of holdings and investments the company chooses to maintain, weighing the benefits of ownership with the potential liabilities. With this approach, the idea is to arrange the companys investment portfolio in a manner that presents a balance between the potential gains and the level of risk associated with particular investments. Under the best of circumstances, financial corporate risk assessment can help maximize returns while limiting risk, based on the combination of assets that are purchased and held in the name of the company. The different methods of corporate risk assessment come together in a cohesive effort to protect the interests of the company and position the business to capitalize on all opportunities without incurring an unreasonable level of risk. The specifics of how this is accomplished will vary, depending on the type and size of the business operation. While the strategies employed may differ from one business to another, the basics of paying attention to internal, external, and financial factors will always be present if the risk assessment approach is to succeed.

Corporate risk analysis:

Corporate risk analysis is a process that may be employed in two different ways. One approach has to do with a company assessing the risk associated with entering into certain types of transactions or partnerships, effectively deciding if the level of risk involved is offset by the potential rewards. A slightly different application of corporate risk analysis has to do with investors who are thinking of investing in a particular business enterprise, but want to determine the nature and type of risks involves in choosing that course of action. With both applications, there are a few basic tips that will help the analysis provide helpful information, making it easier to come to the right decision. As it relates to the internal decision-making process, corporate risk analysis is focused on identifying potential circumstances that could prove to be corporate dangers with the ability to undermine the function of the company. As a part of

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the risk management process, this type of analysis takes into consideration everything from which vendors to do business with to opening new facilities and closing older ones. One of the most effective tools in this type of analysis is to investigate all known courses of action closely, and project the outcome of each of those choices, allowing for some variables in each scenario. Along the way, certain risk factors will either be identified as being sufficient to discourage a course of action, or the projections will make it possible to determine how to minimize risk and still enjoy the benefits of choosing that particular option. The same general approach to corporate risk analysis also works for the investor who is seeking a solid business opportunity. Beginning with the current circumstances of the business effort, the investor can make use of various tools to project the future movement of the company and what type of returns can be reasonably anticipated. Here, the goal is to project how the company will perform in various market conditions, including the increase or decrease in a customer base, the potential for the product lines to become obsolete in a specified period of time, and even the chances that the company will be able to expand within a given time frame. Following each projection through to a logical conclusion makes it easier to decide if the returns are worth the risk, or if the investor should look elsewhere. Corporate risk analysis in any form calls for evaluating all data at hand, determining what is relevant, then using that data to project outcomes. Since circumstances can change frequently, the process of analyzing corporate risk is ongoing. This means that while a corporate risk analysis conducted today may appear very promising, events like the onset of a recession, a political coup or even a natural disaster that destroys a companys major production facilities could change the level and type of risk significantly. For this reason, corporate risk analysis should be viewed as a process and not an event that can be considered finished.

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CONCLUSION
The different methods of corporate risk assessment come together in a cohesive effort to protect the interests of the company and position the business to capitalize on all opportunities without incurring an unreasonable level of risk. The specifics of how this is accomplished will vary, depending on the type and size of the business operation. While the strategies employed may differ from one business to another, the basics of paying attention to internal, external, and financial factors will always be present if the risk assessment approach is to succeed. The general approach to corporate risk analysis also works for the investor who is seeking a solid business opportunity. while a corporate risk analysis conducted today may appear very promising, events like the onset of a recession, a political coup or even a natural disaster that destroys a companys major production facilities could change the level and type of risk significantly. For this reason, corporate risk analysis should be viewed as a process and not an event that can be considered finished.