Title: Vital concepts of Risk Management | MIT School of Distance Education
1Vital Concepts of Risk Management
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2Vital concepts of Risk Management
It includes forecasting potential risks like
financial uncertainties, strategic management
errors, legal liabilities, accidents and natural
disasters, and making certain provisions to
manage them.
3The Elements Of Risk Management
Risk identification Businesses operate in a
dynamic and ever-changing environment which is
laden with different kinds of risks that
ultimately result in financial losses. Thus,
identifying a potential loss is imperative. We
need to identify and understand the risk
thoroughly before we can move forward and decide
how to deal with it. A risk manager specializes
in detecting risk exposure areas. His job
includes devising and implementing appropriate
techniques to identify the risks.
4- Risk evaluation
- In order to understand how to control the
expected losses, we need to evaluate the
potential risks. The risk manager should have a
clear understanding of the risk- how badly it can
affect the business. He should understand its
impact on the business and its probable frequency
of occurrence. The evaluation is done using both
the qualitative and quantitative methods.
Qualitative evaluation is based on past
experiences of the risk manager. He evaluates the
possible effects of specific events on the
enterprise. On the other hand, quantitative
evaluation works on accuracy. It produces a more
developed risk model with accurate projections,
depending on the quality of the input data. At
times, these two methods are used together in
order to produce a fairly comprehensive risk
analysis.
5- Risk control
- Risk control includes two aspects- loss
prevention and loss reduction. A risk manager
cannot completely prevent a loss in a given area,
but a sound risk management can decrease the
frequency of loss in that area. It also includes
taking measures that reduce the cost and severity
of the losses. Decreasing the frequency of losses
and reducing their severity once they occur are
the two major goals of risk control. Another way
of preventing loss is by eliminating the risks. -
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6- Certain steps can be taken to prevent the
occurrence of risks. These include - Risk avoidance A risk can be avoided by changing
the location, procedure or equipment or by giving
up an activity that gives rise to risk in a
business. - Risk reduction Risk can always be reduced by
taking certain steps like installing security
devices, inspections, security patrol, and
keeping a check on the employee. - Risk retention It includes building up a
contingency fund to finance the loss incurred.
This is the financial risk control aspect. A
sound risk management ensures the identification
of risks and creating appropriate financial
reserves for dealing with the expected or
incurred loss. -
7- Risk financing
- After identifying and evaluating the risk,
you need to minimize the loss in a proper manner.
For that, the manager must cover the risk with
insurance or with a combination of both insurance
and risk retention methods.
8Conclusion
- Thus, when a business makes an investment
decision, it exposes itself to a number of
financial risks. In order to minimize and control
the exposure of businesses investments to such
risks, fund managers and investors practice risk
management. Risk identification, Risk evaluation,
Risk control, Risk financing these are Vital
concepts of Risk Management - If you are eyeing to shape your career in the
field of risk management, then you should pursue
MIT-SDEs 18-months Post Graduate Diploma in Risk
Management. - MITSDE, Pune offers Distance Learning Courses in
Management, Distance Education Courses, Distance
MBA, Correspondence MBA Equivalent Courses and
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9THANK YOU !!
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