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Introduction To Risk Management: Annalyn Mallari-Caymo, LPT, Maed-Edma Lecturer

This document provides an introduction to risk management. It defines risk and lists three types of risks: economic, natural, and human. It then discusses four basic ways to handle and control risks: risk prevention and control, risk transfer via insurance, warranties, or ownership structure, risk acceptance, and risk avoidance. Risk transfer methods like insurance and warranties are described in more detail. The document provides definitions of risk from several standards organizations and discusses why entrepreneurs need to take risks.

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Nicole Ocampo
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Download as PPT, PDF, TXT or read online on Scribd
67 views

Introduction To Risk Management: Annalyn Mallari-Caymo, LPT, Maed-Edma Lecturer

This document provides an introduction to risk management. It defines risk and lists three types of risks: economic, natural, and human. It then discusses four basic ways to handle and control risks: risk prevention and control, risk transfer via insurance, warranties, or ownership structure, risk acceptance, and risk avoidance. Risk transfer methods like insurance and warranties are described in more detail. The document provides definitions of risk from several standards organizations and discusses why entrepreneurs need to take risks.

Uploaded by

Nicole Ocampo
Copyright
© © All Rights Reserved
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Introduction to

Risk Management
ANNALYN MALLARI-CAYMO, LPT, MAED-EDMA
LECTURER
Lesson Objectives
Define Risk and Risk Management
List and Describe 3 Types of Risks
Know and Understand 4 Basic Ways to Handle and Control these Risks
List 3 types of Ways to Transfer Risks
Know the Difference Between Risk Avoidance and Risk Acceptance
Risk Taking Behavior
Risk-Averse
Risk-Neutral
Risk-Taker (Risk-Seeker, Risk-Lover)
Organization Definition of Risk
ISO Guide 73 Effect of uncertainty on objectives. Note
ISO 31000 that an effect may be positive, negative, or
a deviation from the expected. Also, risk is
often described by an event, a change in
circumstances or a consequence.

Institute of Risk Management (IRM) Risk is the combination of the probability


of an event and its consequence.
Consequences can range from positive to
negative.

Institute of Internal Auditors The uncertainty of an event occurring that


could have an impact on the achievement
of the objectives. Risk is measured in terms
of consequences and likelihood.
RISK MANAGEMENT

Risk management encompasses the


identification, analysis, and response to risk
factors that form part of the 
life of a business.
Why entrepreneurs need to
take risks?
1. You will no longer have to ask “what-if”?
2. You learn from taking risks
3. Innovation and opportunity are tied to risk
4. Those who take risks already have a
competitive advantage
5. Risk-takers may be more content and satisfied
with their lives
Kinds of Risks

Economic
Natural
Human
Economic Risks
◦ These risks occur from changes in overall
business conditions.
◦ This can include:
◦ amount or type of competitor(s)
◦ changing consumer lifestyle
◦ population changes
◦ government regulations
◦ inflation
◦ recession
Natural Risks
Natural risks are result from natural disasters or
disruptions
◦ floods
◦ tornadoes
◦ hurricanes
◦ fires
◦ droughts
◦ lightning
◦ earthquakes
◦ even sudden abnormal weather conditions
Human Risks
These are caused by human mistakes and errors, as well as
the unpredictability of customers, employees, or the work
environment
This could include:
◦ Theft
◦ injury on the job
◦ bad checks
◦ employee error
◦ Negligence
◦ Incompetence
◦ etc.
ENTREPRENEURIAL
RISKS
Financial risk
Strategic Risk
Technology Risk
Market Risk
Competitive Risk
Reputational Risk
Environmental, Political, and Economic Risk
Categorizing Risk

Pure Risk vs. Speculative Risk


Diversifiable Risk vs. Nondiversifiable Risk
Fundamental Risks and Particular Risks
Ways to Handle Business Risks
There are 4 principle ways to handle risks

◦Risk Prevention and Control


(Loss Prevention)
◦Risk Transfer
◦Risk Acceptance
◦Risk Avoidance
Risk Prevention and Control
◦ Screening and Training Employees
◦ Providing Safe Conditions
◦ Providing Safety Instruction
◦ Preventing External Theft
◦ Deterring Employee Theft

◦ This is often called “Loss Prevention” in the business world


Risk Transfer
3 Common Risk Transfers
◦ insurance
◦ product/service warranties
◦ transference through business
ownership
Insurance
◦ Insurance policy - contract that covers a business with a
specific type of insurance reducing risks
◦ Business liability - insurance protects a business against
damages for which it may be held legally liable, usually
up to only $1 million.
◦ Personal liability - covers damages by customer and/or
employees
◦ Product liability - protects from personal injury caused
by product manufactured or sold by the business
Product/Service Warranties

Warranties are simply


promises made by the
seller or manufacturer with
respect to the performance
and quality of a product
and protection against loss
Transference Through Ownership

The total amount of risk the business


must handle depends in part on the type
of business ownership.
Risk Acceptance

When the business assumes the loss responsibility


into the upkeep of the company
Most companies pull out a certain percentage of
their revenue for damages, loss to theft, and unsold
items.
Risk Avoidance

Risks can be avoided by an advance anticipation


Following market research can assist a business in
making the decision on whether or not to invest in a
product.

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