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Risk Management Strategies An Institutional Experience

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Risk Management Strategies An Institutional Experience Presented By: Charity Mati Risk & Recovery Manager KADET LTD May 2010 Committed to providing Quality ... – PowerPoint PPT presentation

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Title: Risk Management Strategies An Institutional Experience


1
(No Transcript)
2
Risk Management Strategies An Institutional
Experience
  • Presented By Charity Mati
  • Risk Recovery Manager KADET LTD
  • May 2010

Committed to providing Quality financial services
3
OVERVIEW
  • General look on Risk.
  • Risk Management Strategies.
  • Risk Management Strategies Applied By KADET.
  • Lessons Learnt During Our Interaction With Low
    Income Earners.

4
What is Risk?
  • It is an event or condition that may or may not
    occur but if it does occur, will impact on the
    ability of the organization to achieve the set
    objectives.

5
Risk isnt necessarily bad!!!!
  • 1. Competition can either be seen as
  • A risk leading to a company being exited from
    the business or as a platform for innovation
  • Case Banks vs. Safaricom
  • 2. Fibre optic technology can either be viewed
    as
  • A risky undertaking due to increased hacking
    vulnerability or a platform for increased
    e-commerce
  • Case. Safaricom data services

6
Common Scenarios in Organizations
  • No risk function.
  • Risk is a major of Internal Audit.
  • Auditors are to be avoided.
  • Management is happy when no major risk/findings
    is detected by an outsider e.g. an Auditor.
  • Crisis is good for learning hence wait until it
  • Happens.

7
What Is ERM?
  • Enterprise Risk Management (ERM)in business
    includes the methods and processes used by
    organizations to manage risks and seize
    opportunities related to the achievement of their
    objectives.
  • Identifying particular events or circumstances
    relevant to the organization's objectives (risks
    and opportunities), assessing them in terms
    of likelihood and magnitude of impact,
    determining a response strategy, and monitoring
    progress.

8
Enterprise Risk Mgt Strategies
  • Risk Identification Risks must be identified
    and documented at both the transaction and
    portfolio levels.
  • Risk Measurement The next step is to measure
    its significance in terms of size, duration and
    probability of adverse occurrences.
  • Risk Control There are three basics ways to
    control, or minimize their adverse consequences
    a) avoiding or placing limits on certain
    activities/risks, b) mitigating risks and c) or
    offsetting risks. Risk limits, policies,
    standards and procedures that define
    responsibility and authority should be developed
    under each risk category.

9
Enterprise Risk Mgt Strategies Cont.
  • Risk Monitoring
  • The MIS must accurately identify and measure
    risks at the inception of transaction, subsequent
    activities and any significant changes in risk
    profiles.
  • Then
  • Acceptance
  • Control
  • Transfer
  • Reduce
  • Prepare BCP
  • prevent

10
The Risk Management Process
11
Benefits of Effective Risk Mgt.
  • An increased likelihood of achieving the MFIs
    vision and mission.
  • Prioritizing the allocation and use of capital
    and other resources.
  • Successful product development and roll-out.
  • Giving an early warning of potential problems.
  • Providing management with the skills to be
    prudent risk takers.
  • Better ability to respond to competition.
  • Sustain and improve institutional reputation.
  • Better evaluation of costs for products and
    services.

12
Risk Mgt. Strategies that KADET applies
  • Institutional culture.
  • Client orientation.
  • Staff incentives.
  • Delinquency penalties.
  • Enforcing contracts.
  • Delinquent Management Manual.
  • Profiling Risk. (Risk Register.)
  • Branch and H/O loan committees.
  • Compliance checklist- Enforcing policy adherence
  • Business Continuity Plan(BCP).

13
Risk Mgt. Strategies that KADET applies Cont.
  • Risk Management Training- This Includes
  • Risk management terminology.
  • Roles responsibilities.
  • Concepts and principles.
  • Process elements.
  • Expected benefits/consequences.
  • Tool application and demonstration.

14
Risk Mgt. Strategies that KADET applies Cont.
  • Maintaining a thriving relationship with the
    customers from the commencement of the service
    delivery in order to encourage regular payments.
  • Understanding customer in order to effectively
    communicate with and create a culture of paying.
  • Generating a successful relationship between us
    and customers in order to maximize the credit
    risk management.

15
Risk Mgt. Strategies that KADET applies Cont.
  • Investigating strategies to improve communication
    and apply improved processes of corresponding
    with the those customers.
  • Standardized /Mapped processes.

16
Hindrance to effective Risk Mgt.
  • Narrow focus on risk e.g. debt collection only
  • Complex reporting.
  • Unclear accountability.
  • An organization implementing risk Mgt due to
    regulation.
  • Confidence that other assurance functions exist
    to handle risk e.g. Audit.
  • Resistance to change.
  • We are not badly off attitude.

17
Lessons Learnt during our interaction with low
income earners.
  • Poor/ Non existent preparedness for dealing
    with loss.(Inadequate risk mitigation for their
    business).
  • Business Planning- Not usually informed by
    professionalism. Budget, cash flows etc.
  • They do not have networks that sufficiently
    support their enterprises e.g. Marketing
    linkages, Information system, Business support
    services.
  • Low income people have informal resilient
    mechanism to cope with risks.

18
Lessons Learnt - Contd.
  • People with low incomes save for such social
    related eventualities like dowry, death,
    wedding ( often informally).The formal ways of
    saving include, Merry go round, saving in kind,
    fattening Livestock etc.
  • Low income people demand for financial services
    like Insurance and they are willing to pay for
    the services.
  • Low income entrepreneurs need more than credit,
    they need savings, housing, and insurance.MFI
    must become innovative.

19
Lessons Learnt - Contd.
  • The low incomer earners are not poor in mind
    and in ability to become great entrepreneurs all
    they require is financial services easily
    availed to them in simplest way possible among
    other support .
  • That there are very innovative but limited by
    technology.
  • That theyre credit worth.
  • They know what they want, just listen to them!

20
CONTACT US
KADET LTD. Capitol Hill Towers 2nd
Floor Cathedral Rd Off Haile Selassie
Avenue Nairobi - Kenya Telephone 254
2731984/56 Cell 0722 200 402 To learn more
about KADET, please visit our website
on Website www.kadet.co.ke

21
The End Thank You!
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