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By Dr Safdar A Butt
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.
Risk Identification / Exposure Risk Assessment Selection of risk management techniques Implementation Review
Risk Identification
Risk profile of a company Formal listing of all potential risks. External professional help Risk is inevitable; however unfavorable consequences of risk can be controlled.
Classification of Risk
Production risk Price risk of inputs / outputs Reputational risk Project risk Environmental risk (weather) Political risk Economic conditions risk
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Risk Assessment
Having 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?
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Internal controls
Get 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.
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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.
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List significance risks; how they are being identified, assessed and managed. Report on effectiveness of the systems put in place to manage these risks List of actions being taken to remedy significant failings or weaknesses Comment on need for greater monitoring of procedures
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Turnbull Report
Risk Assessment Control Environment Control Activities Information and Communication Monitoring
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Risk Assessment
Clear objectives, clearly communicated to all concerned. Significant risks assessed regularly
Market risks Technological risks (H&S, Environment) Credit and liquidity risks Reputational risks, legal risks
Disasters happen, or are made to happen. What plans does a company have to ensure that:
Its operations are restored quickly Its data is not lost
Thank you
Dr Safdar A Butt
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