RISK MANAGEMENT :

JOURNEY OR DESTINATION ?

What is Risk?

“Any uncertain event that could significantly enhance or impede aCompany’s ability to achieve it’s current or future objectives, including

failure to capitalize on opportunities……”

The possibility of goodthings not happening(risk as opportunity)

The potential that actualevents will not equalanticipated outcomes(risk as uncertainty)

The threat of bad things(risk as hazard)

NewTechnologiesNew markets

Exchange rate fluctuationsCoal price fluctuation

Flood or Fire

Risk Management

Risk Management is the process of defining all the risks that an organization faces

Building a framework to not only monitor and mitigate those risks but to use risk management to increase shareholder value

The point of risk management is not to eliminate it; that would eliminate reward

The point is to manage it………

Shareholder value

Need for Risk management Uncertainty in Enterprise

Growing Complexity in Business Environment

Statutory Obligations

Contractual Obligations

Social Obligations

High Profile Corporate Failures

Current Approach to Risk Management

Traditional approach—Silo approach Physical risks Property risks Currency risks Interest rate risks Commodity risks Credit risks

Transaction orientation

The Universe of Risk

P R O C E S S

P H Y S IC A L A S S E T S

P E O P LE

L E G A L

O P E R A T IO N S

C A P IT A L S T R U C T U R E

R E P O R T IN G

C R E D IT A N D L IQ U ID IT Y

M A R K E T

F IN A N C IA L

S T A K E H O L D E R S

G O V E R N A N C E

M A R K E T S T R U C T U R E

S T R A T E G IC

IN T E L E C T U A LP R O P E R T Y

IN F O R M A T IO NM A N A G E M E N T

S Y S T E M S

K N O W L E D G E

E N T E R P R IS E

Traditional Risks V New Risks Traditional Risks

Easily describable and readily assessable in monetary terms

Amenable to classic Risk Management New Risks

Identifiable to a limited extent and not easily assessable (if at all)

Require skills of Extended Risk Management

Why Enterprise Wide Risk Management

Segmented approach leaves uncovered gaps which EWRM can plug

EWRM could result in cost optimization Leads to closer integration of operations with

the mission of the Company. Is a well defined and integrated process.

The new perspective on risk management

“Good risk management should enable options while protecting value already created.”

Risk Management ProcessObjectives are set at the strategic level, establishing a basis for operations, reporting and compliance objectives

Identify the most relevant risks, based on the entity/SBU/Process objectives and situation

Evaluate the level of risks, based on probability and the significance of their potential impact

Decide appropriate management action to respond to assessed risk

Monitor the implementation and success of risk mitigation action plan. Report to the appropriate level to meet reporting requirements

SetObjectives

Identify Risks

Assess Risks

Control/Act

Monitor/Report

Risk Definition Risk Valuation Risk Mitigation

Process of Risk ManagementProcess of Risk Management

Components PricingDefinition of Valuation Model

Valuation process and guidelines

Evaluation of Risks

Risk Transfer Policy

Risk Transfer Procedure

Cost benefit analysis

Documentation of Process

Monitoring mechanism

Administration proceduresBusiness Objectives

Business Process Definitions

Organization Structure

Delegation of Authority and Responsibility Definitions

Internal Controls and Systems Documentation

Risk Definition

Components of Risk

Probability Analysis

Process of Risk Management Risk Identification

Risk Measurement

Risk Control

Risk Transfer

Risk Financing

Risk Retention

PROPERTY RISKS

Damage to Physical Assets Acts of God Accidents Break down

FINANCIAL RISKS

Monetary Loss from Theft and Burglary Business interruption Bad credit

PEOPLE RISKS

Loss to Employees ILL Health and accident Death Overseas travel

LIABILITIES RISKS

Loss from Operations Product liabilities Public liability Directors & Officers

liabilities Errors & Omissions

liabilities

Insurable RisksInsurable Risks

Emerging issues in Insurance

De-tariffing

A R T

Captives

Derivatives

Stakeholders Expectations

Stakeholders Customers Shareholders Employees Society Government Suppliers Financiers

Understanding Expectations

Establish what shareholders value about the company

Identify the risks around key value drivers Determine the preferred treatment for the

risks Communicate risk treatment to the

shareholders

Elements of Risk ManagementArchitecture

Senior Management/Board commitment Integration with Business Process Risk Management Structure Risk Management Reporting Change Management responsibility Communication and training Reinforcement through HR mechanisms Monitoring of risk management process

Risk Management Roles & ResponsibilitiesParty Brief Role & Responsibility

Chief Executive

Officer

Ensures the implementation of risk management framework and process and ongoing risk assessment of risks.Promotes risk culture and ensures the risk management process is sustained organization wide.

Risk Management

Committee

Defines the risk management policy framework and process.Promotes and implement monitoring of risk management strategies and policies.

Risk Manager Is the risk management process owner. Ensures the implementation and compliance with the risk management policy and process.

Audit Committee Ensures adequacy of control frameworks to manage risks across the organization - monitoring.

Treatments of Risks

Risk management is a Continuous Journey

THANKS FOR YOUR TIME AND ATTENTION