MANAGING RISK

The Smoking Gun Theory

The
Right Manage
Corporate People
Strategy

Insurance
Manage
Against Risk Management Processes
The Risk

Monitor Spread
The Risk The Risk
 The Right Corporate
Strategy
These days every company faces challenges of competition.
Any new market offering can be introduced to the market
every day allowing the market to continuously develop. This
impose a great danger to companies. The most basic threats
of all is finding that customers no longer want the product that
the company sells. This is why having the right corporate
strategy and policies can reduce risk.

Conglomerate were once seen as a way of reducing risk.

According to Wikipedia, conglomerate is defined as
Conglomerate can reduce business risk because if one market
is doing poorly, the company can benefit from the other
market. But not all company are very successful in
implementing conglomeration. One of the company that has
successfully in implementing conglomeration is Bakrie.
 Setting the Risk Policies
A good company will have a policy for each
area of risk . Those risk include the SHE
(safety , health, environment) risk and policy on
fraud and computer failures. These policy
should be as brief and simple as possible so
that everybody could read and understand. A
risk policy should be translated into strategy
statement which are implemented at the lowest
suitable level ; for example, a SHE policy should
be implemented in each manufacturing plan.
 Manage Process
 Implement documented management system for all major risk
A management system involves writing down a company’s main
procedure and ensuring that they are adopted by the staff.. Standard
for quality like iso 9000 ( a standard of maintaining product quality) are
used by companies to avoid crises.
 Prepare for problem
The company should carry out emergency drills to check it’s
preparedness
 Introduce safer solution
Achieving safer solution may involve improving storage facilities,
abandoning a risky process or exiting from an unstable market.
 Isolate the treats
Creating Physical barrier or creating fire walls to separate one business
to another are examples how risk are isolated
 Protect the asset
Companies can minimize the damage that will be caused if the threat
materialize. For example, sprinkles will minimize the spread of fire.
 Managing People

 Set standard from top

 Allocate responsibility for risk management
 Risk manager
 Training people
 Devolving responsibility and a culture of opennes
Set Standards From The Top
 Top management must be involved in
setting business policy on risk and be
committed to it
 Managers must be given responsibility
for managing the risks within the area
of their responsibility and staff must
understand the kind of risks they’re
facing and also how to manage them.
Set Standards From The Top
 Management must be ready to act
quickly to changing circumstances
 Management team must also be
balanced and experienced
 Allocate Responsibility For Risk
Management
 Each risk must be someone’s
responsibility and it must lie with
line managers and the workforce
 Risk Management has traditionally
been the responsibility of the
company secretary and the finance
director
 Risk Manager
 Companies are increasingly allocating the
management of more of these risks to one
manager, the risk manager
 Risk management decision making is
becoming more centralized.
 Most small companies can’t afford to have
a specialist in each area. Problem with
grouping risk is that 1 person may be an
expert in 1 field but not on other field
Training people To Be Aware of
Risk and to Reduce Error

Risk Manager should provide a

training program in risk awareness
Devolving Responsibility and a
Culture of Openness

‘If a corporate value systems place

too much emphasis on penalizing
failure than rewarding success,
people will not take risks’
 Spreading The Risks
Companies can lessen their risk by
developing new technologies which
could co-exist with their present
one. But every change also create
new risk.
 Monitoring The Risk
 Measure the risks
Taking measurements lets the business see where it is vulnerable, and where
losses are occuring
 Have an early warning system
The company should have trading information available within days of a
transaction. It is no longer adequate to wait until the end of the month. A rapid
information is a great importance in risk management.
 Keep documentation
1. Procedure manuals
2. Insurance policies
3. Maintenance records
4. Plans of specific premises, plus maps, photographs, flow charts and other
information recording drains, stopcocks, hazards, etc
5. Loss records
 Audit the risks
An audit program may use a checklist to ensure that risk are identified and
managed
 Insurance Against The Risk
Insurance should not be neglected, for this is part of the
contigency plan. Having put in place risk management
procedures, companies should seek a reduction or
stabilization of insurance premiums. Different forms of
insurance are emerging. Larger companies are now
setting up their own captive insurance companies,
which keeps the cash in the business and provides
insurance at reasonable rates, thereby saving the profit
margin that would have gone to an outside insurance
company.
 Study Case PT. Bakrie &
Brothers
Brief History

Bakrie & Brothers began its long and

distinguished history as a general
commodities trading firm in 1942. Today
Bakrie & Brothers is one of Indonesia's
foremost corporations with a scope of
business interests that spans such profit
centers as infrastructure,
telecommunication, and plantations.
 Study Case PT. Bakrie &
Brothers
Choosing Corporate strategy & spreading the
risk

Bakrie& Brothers Choose to conglomerate their

business by entering 3 different type of industry
such as infrastructure, telecommunication, and
plantations. This has helped the bakrie&rothes to
reduce their business risk and generate more
income.
For example, bakrie as the owner of PT. Lapindo
suffers a great loss from the “Lumpur lapindo” case.
But their Bakrie Telecom and Bakrie Sumatra
Plantation is doing very well so that they will still
make profits.
 Study Case PT. Bakrie &
Brothers
Managing Process

One of Bakrie’s compant Pt. SPIJ has been certified by

the American Petroleum Institute under API SCT and API
SL certifications. SPIJ is also certified for ISO 9001 by the
American Petroleum Quality Registrar (APIQR).
SPIJ has been audited and listed as qualified supplier of
carbon steel and CRA (Corrosion Resistance Alloy) casing
and tubing (OCTG) for the most important international
oil companies. Beside using quality sources for High Alloy
Grade, Chrome Grade, and Carbon Grade pipes from its
global suppliers, SPIJ is also one of the most state-of-the-
art companies in the word who uses advanced
technology in overall production process.
SPIJ has also isolate their threats by separating their
worker from their pipe process facilities by using CNC
Machine and PMC Large and Small Finisher Machine
 Study Case PT. Bakrie &
Brothers
Monitoring the risk

PT. Bakrie Brothers is a major example

why companies should monitor their risk.
One of their sub company PT. Lapindo
has failed to measure their risk of drilling
a pipe which has cause them millions o
dollars.
 Study Case PT. Bakrie &
Brothers
Insure against the risk

In covering their risk PT. Bakrie&Brothers

set up PT. Bakrie life to insure their
asset. But from our sources they also
use other Insurance companies
because their asset can not be covered
by PT. Bakrie Life alone.