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Risk Management and Insurance - Case solution

Research · December 2019

DOI: 10.13140/RG.2.2.12239.00162

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 Sultan Qaboos University
College of Economics and Political Science
Economics and Finance Department
FINA3331
Risk Management and Insurance
Group Assignment
Due Date: 8/12/2019
Instructor: Dr. Alya Al Fori

Student Name: Student ID Student Signature

1) Taif Salim Al Kalbani1 118328 …….………….
2) Hamida Mohamed Al Ajmi 119261 ………………..
3) Amal Mahmood Bahanta 119104 .……………….

Declarations:
• I (We) declare that this assignment is all my (our) own work and the sources of
information and material which I/we have used, including the Internet sources, have
been fully identified and properly acknowledged through citations and references, as
required by the referencing style of American Psychological Association.
• I (We) confirm that this assignment, or parts of it, has not been previously submitted
for evaluation elsewhere.
• I (We) agree that, if necessary, investigations can be made regarding the authenticity of
this assignment.
• I (We) have read and understood the SQU’s policy on academic misconduct and
• plagiarism.
Introduction:
Risk management is an essential part of each institution. The ability to deal with risk helps the

organization to achieve its goal and make decisions confidently. Each organization must take

risks into consideration to define objectives and give them various options on how to deal with

potential problems. In addition, the organization must use Risk management process to help

them achieve goal, which are: determination of objectives, identification of risks, evaluation of

risks, selection of the tool, implementing the decision and finally evaluation and review. The

Main Library at Sultan Qaboos university serves a wide range of people not only SQU students.

It provides them reading and borrowing books and e-resources database searching. This report

will discus the Risk Management process that The Main Library analyze in order to identify and

quantify risks and minimize the negative impact may have.

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 1. Objectives and risk policy:

Objectives:

The risk department of the main library objective is to reduce anxiety so that employees will be

able to work freely without worrying about future accidents and incidents.

Objective of the library is to provide accurate and transparent information. Moreover, the main

library must keep its records of books up to date since it’s using online checking in and checking

out for printed collections and that is to not create confusion for the library visitors. In addition,

the library must keep its machines in a good shape by doing periodic check-ups.

The main library employees must learn the ethics and rules followed by the organizations to

avoid incidents that are led by dishonesty acts. Also, the strategy of library must be maintained

and checked regularly to ensure its relevancy. In addition, the main library must ensure its

objectives consistency with the strategy.

The main library is a public library therefore it must provide its full and complete library services

to public to spread awareness of the need to read books and to keep the public educated and

informed of its surroundings.

Risk policy:

The main library risk department will avoid, reduce or transfer any risk the main library could

face in the future.

Risk policy of the main library will deal with losses that could arise from property damage, legal

liability and dishonesty and have small exposures that will not have a strong impact on the main

library operations through avoidance.

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 Risk policy of the main library will deal with losses that are arise from property damage, legal

liability and dishonesty that can impact the main library operations and can be covered by the

library’s cash flow.

In this risk policy, the main library will purchase insurance for equipment or machines that its

loss of its property or damage could result to a high financial loss that cannot be covered by the

main library’s existing cash flow.

The risk department of the main library will be responsible for buying insurance and ensuring

the safety of the employees by providing a safe working environment.

The risk management department will be given an annual budget for buying insurance and

paying premiums. In addition, the department will purchase detectable in case the budget does

not cover the total insurance.

2. Identification of risks:

Financial
Delaying of fines Fines related to delaying the return of books on the date of return or
payments destruction of some library materials and resources.
emergencies' Consuming more money for repair and maintenance as a result of an
financial reserve emergency event or accident that causes material, people and general
damages.
Loss of property This risk can cause some resentment in the library if it occurs
frequently, especially for important things such as books and
resources, or anything essential in the library such as furniture,
computers, magazines and newspapers intended for public use.
Operational

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Electrical Failures due to wiring problems may interrupt electricity or networks.
equipment & As well as the failure of equipment that may cause downtime or
wiring inability to use the library systems and databases, thus will be
difficult to deal with the customers or may cause prolonged service
delivery time for the them (efficiency).
Fire risks Fires cause interruption of work or production for a period until
maintenance. It may also affect equipment, resources and people on
the fire site.
Lake of external Delays in communicating with customers regarding fines and
Communication payments may lead to financial or operational gaps that should be
reduced to achieve the highest quality of work. So, lake of
communication with clients could lead to many problems with
bookings rooms in the library.
Compliance
Misunderstanding Lack of understanding of the laws and regulations of the library by
of rules, laws and employees or clients may lead to many problems. It can also cause
regulations embarrassment situations with third parties such as management and
external suppliers.
Reputational
Violence/ Verbal Exposure to racist or abusive situations in the library, whether among
abuse the staff themselves, or with employees and clients, creates a negative
atmosphere and a bad reputation for the library, which may cause the
customer to refuse the library and may speak and share things that do
not benefit the library. Instead, the matter may be settled through
courts.

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 3. Evaluation of Risks:

• Priority Ranking Based on Severity:

Severity is the extent of Damage to the institution, its objectives, and its people
because of a risk event occurring. Our corrective actions must prioritize by addressing
Highly Risk before Low Risk. The Risk are ranked as following:

➢ Critical: can cause bankruptcy

➢ Important: requires borrowing
➢ Unimportant: dose not require borrowing , can be met using
existing asset/income

Risks Critical Important Unimportant

Delaying of fines 
payments
emergencies' 
financial reserve
Loss of property 
Electrical 
equipment &
wiring
Fire risks 
Lake of external 
Communication
Misunderstanding
of rules, laws and 
regulations
Violence/ Verbal 
abuse

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 • Priority Ranking Based Frequency:

Frequency is an estimate of the probability of the risk occurrence. It is useful in differentiating

among exposures with relatively equal potential severity. Exposures with high frequency must
have more attention than low frequency.

➢ Almost nil: the loss is probably not going to occur

➢ Slight: the event is possible (did not occur and is not expected to take
place in future)
➢ Moderate: occasionally took place (expected to happen again)
➢ Definite: regular happen (will probably occur regularly again)

Risks Almost nil slight Moderate Definite

Delaying of fines 
payments
emergencies' 
financial reserve
Loss of property 

Electrical 
equipment &
wiring
Fire risks 
Lake of external 
Communication
Misunderstanding 
of rules, laws and
regulations
Violence/ Verbal 
abuse

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 4. Consideration of alternatives - selection of the tools

• Delaying of fines payments

Make clear laws on library policies on use of books and resources, which are easy to access and

remember. To retain the risk, reminders and messages can be sent at regular intervals to clients,

reminding them of borrowing and return times. A receipt can be printed after each borrowed

book explaining the above. Alerting employees to notify customers and spread the necessary

awareness seems good solutions though.

• emergencies' financial reserve

Some of the emergency risks that may occur may cause significant material damage resulting

in funds for maintenance and repair of the premises to be prepared to complete the provision of

library services. It can also cause money to go to compensation in the event of serious human

damage. The library prepares its reserve budget based on forecasts of hazards due to exposure

and frequency, but some events may spiral out of control, requiring the library to prepare a

system of insurance by transfer the risk and to put a comprehensive security system in the

library, starting with alarms, cameras and guarding on the main doors, trying to reduce the

possibility of the risk.

• Loss of property

Loss of property is common in public places, so this can be avoided by placing cameras and

guarding at gates with scanning devices/gates. It can be retained internally in case of the loss of

simple things such as papers, pens and notes ... The risk, if infrequently occurring on more

important things, such as books and important sources, can be reduced by imposing disciplinary

actions and fines on the perpetrator.

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_____________________________________________________________________

• Electrical equipment & wiring

The risks of electricity bear many consequences if they occur, so the library must retain the risk

by putting a backup power generator. Maintenance should be periodic for wires and electrical

system. It can also set up guidelines for dealing with emergency situations If anything goes

wrong.

• Fire risks

We can avoid risk by applying the latest safety standards in the building, equipped with alarms,

fire extinguishers and buttons to call for help to the need and clarify the nearest exits. The risk

can also be reduced in the event happened, people can contact local risk management office,

civil defense and police numbers. Staff can also be trained on first aid and be able to deal with

these situations.

• Lake of external Communication

The library should avoid the risk of loss of customer trust or any problems arising from

ineffective use by promoting effective communication and establishing an integrated database

containing the data of the main clients of the library and follow-up on an ongoing basis. This

risk can be reduced if it occurs by reminding the client of his fines and borrowing policies and

notifying him about the violation of the library's laws. The library can put a recommendation

or note box so that clients can participate and communicate with the library in different ways.

_____________________________________________________________________

• Misunderstanding of rules, laws and regulations

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This risk can be avoided by ensuring that all staff and clients understand the library's policies

and laws. It can also work to raise awareness of all those involved in the library of legislation

and policies of the library. Library policies can also be clearly marked on signboards in the

building and on its official website. If things go wrong, this risk could be retained, and people

could have a second chance and sign a pledge not to violate the laws again.

_____________________________________________________________________

• Violence/ Verbal abuse

Verbal attacks, racism and violence could exist in the library, but rarely. If this happens, the risk

can be minimized and reduced by direct contact with the affected person and an apology verbally

or through an official letter. He may be asked to visit the library to speak with staff or

management to express what happened. This would ensure that he is important and valuable.

5. Implementing the Decisions:

The main library will first add security measures to ensure safety of the employees and the

library’s visitors and that is by installing fire detectors and security cameras. Moreover, the

library will keep checking and maintaining the safety machines. in addition, the main library

will teach its employees how to handle emergencies and how to do first aid.

The main library will teach its employees the objectives of the main library and make sure that

the employees are aware of the risk policy. The risk department then will buy insurance for the

machines and the building. Therefore, in case the loss occurs, the insurance will cover the

financial loss. However, not all machines will be entirely insured since it could be costly for the

main library. Therefore, the risk department will purchase detectable which half the machine

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loss will be insured by the insurance company and rest will be covered by the main library’s

cash flow.

Any risk that has a high frequency and low severity will be retained by the main library. For

example, the delay of fines payments can be retained by the main library since it has high

frequency but low severity. The main library will avoid risks that has high severity and low

frequency. For example, the frequency of a fire erupting in the main library building is every

low but the severity is extremely high. Therefore, the main library will implement security

measure by installing fire detectors and making sure that fire extinguishers are placed in each

floor of the building and in areas where its easy to reach.

6. Evaluation and review:

Evaluating and reviewing the risks identified previously an integral part of the risk

management. Evaluating is the process to make sure that the steps you did for

correction action as you intend. Also it allows to discover mistakes before they

become costly. Each year there is changing and modification so the measures also

changes to fit the new situation.

Review is to check Whether the methods worked as expected. This happened by

repeating the process to insure that technics were appropriate.

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 Conclusion:

In order to deal with risk and the correction action, it is very important to gather as much

information as possible for analyzing to help mange and minimize risk. Determination the risks

that Main library wants to achieve is the main and first step to help us identification the risk they

will face. After Defining risk, evaluation risk is a vital element that can be by using severity or

frequency ranking. Next step is to make decision toward risks by either control or avoid it. last

two steps are implementing decision to minimize risk then review assessment and update as and

when necessary.

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