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Topic 1 : Uncertainty and Risk Topic 2 : Risk Universe

Saturday, September 10 th 2011 Saturday, September 17 th , 2011

Coordinator Antonius Alijoyo

Lecturer Team

Joyce Andries, Stefiny Norimarna, Ridwan Hendra

Team Joyce Andries, Stefiny Norimarna, Ridwan Hendra Risk Management Department of Management Faculty of

Risk Management

Department of Management

Faculty of Economics Universitas Katolik Parahyangan Bandung

2011

Learning Objectives

Learning Objectives Topic 1 : Uncertainty and Risk  What is uncertainty?  What is risk?
Learning Objectives Topic 1 : Uncertainty and Risk  What is uncertainty?  What is risk?
Topic 1 : Uncertainty and Risk
Topic 1 : Uncertainty and Risk

What is uncertainty?

What is risk?

How do we define risk?

How do we deal with uncertainty and risk?

Topic 2 : Risk Universe
Topic 2 : Risk Universe

Category of Risk

Risk Components

Scope of Risk

Learning Objectives

Learning Objectives Topic 1 : Uncertainty and Risk  What is uncertainty?  What is risk?
Learning Objectives Topic 1 : Uncertainty and Risk  What is uncertainty?  What is risk?
Topic 1 : Uncertainty and Risk
Topic 1 : Uncertainty and Risk

What is uncertainty?

What is risk?

How do we define risk?

How do we deal with uncertainty and risk?

What is uncertainty?  What is risk?  How do we define risk?  How do
Group Discussion 1 What is Uncertainty ? What is Risk ? JOY 4

Group Discussion 1

Group Discussion 1 What is Uncertainty ? What is Risk ? JOY 4
Group Discussion 1 What is Uncertainty ? What is Risk ? JOY 4
Group Discussion 1 What is Uncertainty ? What is Risk ? JOY 4
Group Discussion 1 What is Uncertainty ? What is Risk ? JOY 4
Group Discussion 1 What is Uncertainty ? What is Risk ? JOY 4
What is Uncertainty ?
What is Uncertainty ?
Group Discussion 1 What is Uncertainty ? What is Risk ? JOY 4
Group Discussion 1 What is Uncertainty ? What is Risk ? JOY 4
Group Discussion 1 What is Uncertainty ? What is Risk ? JOY 4
What is Risk ?
What is Risk ?

Uncertainty is ……

Uncertainty is …… Condition where we are not sure about what will happen because of lack
Uncertainty is …… Condition where we are not sure about what will happen because of lack
Condition where we are not sure about what will happen
Condition where we are not
sure about what will happen

because of lack of knowledge about the

future risk is recognized

Uncertainty and Risk

Current condition
Current
condition
Uncertainty and Risk Current condition slide by Antonius Alijoyo JOY 6

slide by Antonius Alijoyo

Relation between Uncertainty and Risk

Relation between Uncertainty and Risk
Current condition
Current
condition

slide by Antonius Alijoyo

Uncertainty and Risk

Uncertainty and Risk Current Objective condition slide by Antonius Alijoyo
Current Objective condition
Current
Objective
condition

slide by Antonius Alijoyo

Uncertainty and Risk

Uncertainty and Risk R I S K Current Condition Objective slide by Antonius Alijoyo
Uncertainty and Risk R I S K Current Condition Objective slide by Antonius Alijoyo
Uncertainty and Risk R I S K Current Condition Objective slide by Antonius Alijoyo

R I S K

Current Condition
Current
Condition
Uncertainty and Risk R I S K Current Condition Objective slide by Antonius Alijoyo
Uncertainty and Risk R I S K Current Condition Objective slide by Antonius Alijoyo
Uncertainty and Risk R I S K Current Condition Objective slide by Antonius Alijoyo
Uncertainty and Risk R I S K Current Condition Objective slide by Antonius Alijoyo
Uncertainty and Risk R I S K Current Condition Objective slide by Antonius Alijoyo
Uncertainty and Risk R I S K Current Condition Objective slide by Antonius Alijoyo
Uncertainty and Risk R I S K Current Condition Objective slide by Antonius Alijoyo
Objective
Objective
Uncertainty and Risk R I S K Current Condition Objective slide by Antonius Alijoyo

slide by Antonius Alijoyo

Risk is ……

Risk is …… A condition in which there is a possibility of an adverse deviation from
Risk is …… A condition in which there is a possibility of an adverse deviation from
A condition in which there is a possibility of an adverse deviation from a desired
A condition in which there is a possibility of an
adverse deviation from a desired outcome that is
expected or hoped for

or

a situation, event, or happening that can lead to the non-achievement of objectives
a situation, event, or happening that can lead to the
non-achievement of objectives

Uncertainty and Risk: classic phenomenon

Uncertainty and Risk: classic phenomenon High Risk High Return Return Risk Questions : 1. Which point
High Risk High Return Return
High Risk High
Return
Return

Risk

Questions :

1.

Which point should be taken?

2.

How to compare between two investment alternatives?

3.

Is it possible to get high return

with lower risk?

slide by Antonius Alijoyo

Uncertainty and Risk: current phenomenon

Uncertainty and Risk: current phenomenon High Risk High Return Return Risk Risk and absolute return Zone
High Risk High Return Return
High Risk High
Return
Return

Risk

Risk and absolute return

Zone 1 Zone 2 Zone 3 Insufficient Risk Optimal Risk Excessive Taking Taking Risk Taking
Zone 1
Zone 2
Zone 3
Insufficient Risk
Optimal Risk
Excessive
Taking
Taking
Risk Taking
Risk-Adjusted
Return
Taking Taking Risk Taking Risk-Adjusted Return Risk Risk and relative return slide by Antonius Alijoyo JOY

Risk

Risk and relative return

slide by Antonius Alijoyo

Learning Objectives

Learning Objectives Topic 2 : Risk Universe  Category of Risk  Risk Components  Scope
Learning Objectives Topic 2 : Risk Universe  Category of Risk  Risk Components  Scope
Learning Objectives Topic 2 : Risk Universe  Category of Risk  Risk Components  Scope
Topic 2 : Risk Universe
Topic 2 : Risk Universe

Category of Risk

Risk Components

Scope of Risk

Category of Risk

Based on Basic

Characteristics

Pure Risk

Speculative

Risk

Based on

Impacts

Down-side

Risk

Up-side

Risk

Based on Basic Characteristics Pure Risk Speculative Risk Based on Impacts Down-side Risk Up-side Risk JOY

Category of Risk

Category of Risk Pure Risk • Loss is only possible outcome, can be quantified physically •
Category of Risk Pure Risk • Loss is only possible outcome, can be quantified physically •

Pure Risk

Loss is only possible outcome, can

be quantified physically • The event beyond risk taker’s control

Category of Risk

Category of Risk Pure Risk • Loss is only possible outcome, can be quantified physically •
Category of Risk Pure Risk • Loss is only possible outcome, can be quantified physically •

Pure Risk

Loss is only possible outcome, can be quantified physically

• The event beyond risk taker’s control

Speculative

Risk

Gain or loss can be possible as an

outcome

• The event under risk taker’s control

Category of Risk

Category of Risk • Refers to “bad things happen” • The “bad things “ could reduce/destroy
Category of Risk • Refers to “bad things happen” • The “bad things “ could reduce/destroy
• Refers to “bad things happen” • The “bad things “ could reduce/destroy shareholder value
• Refers to “bad things happen”
• The “bad things “ could
reduce/destroy shareholder value or
fail to the objectives
• Directly affected

Down-Side

Risk

Category of Risk

Category of Risk • Refers to “bad things happen” • The “bad things “ could reduce/destroy
Category of Risk • Refers to “bad things happen” • The “bad things “ could reduce/destroy
• Refers to “bad things happen” • The “bad things “ could reduce/destroy shareholder value
• Refers to “bad things happen”
• The “bad things “ could
reduce/destroy shareholder value or
fail to the objectives
• Directly affected

Down-Side

Risk

• Refers to “good things not happen” • The “good things” could add shareholder value
• Refers to “good things not happen”
• The “good things” could add
shareholder value objectives or help to
achieve the objectives
• Indirectly affected

Up-Side

Risk

Group Discussion 2

Group Discussion 2 Define your own risk as student JOY 19
Group Discussion 2 Define your own risk as student JOY 19
Group Discussion 2 Define your own risk as student JOY 19
Group Discussion 2 Define your own risk as student JOY 19
Group Discussion 2 Define your own risk as student JOY 19
Group Discussion 2 Define your own risk as student JOY 19
Group Discussion 2 Define your own risk as student JOY 19
Define your own risk as student
Define your own risk as
student
Group Discussion 2 Define your own risk as student JOY 19
Group Discussion 2 Define your own risk as student JOY 19

What is Risk Components?

What is Risk Components? Controlled Risk Inherent Risk Activities Residual Risk JOY 20
Controlled Risk Inherent Risk Activities Residual Risk
Controlled
Risk
Inherent
Risk
Activities
Residual
Risk

Relation of Risk Components

Relation of Risk Components Existing Risk Control Objective of Risk Management Additional Risk Control Activities
Existing Risk Control Objective of Risk Management Additional Risk Control Activities Inherent Risk Residual Risk
Existing Risk Control
Objective of Risk Management
Additional Risk
Control
Activities
Inherent Risk
Residual Risk
Controlled Risk
Inherent Risk
Controlled RiskResidual
Risk
Activities

Scope of Risk

Scope of Risk the industry itself JOY 22
Scope of Risk the industry itself JOY 22
the industry itself
the industry itself

Scope of Risk

Scope of Risk the industry itself scope of business JOY 23
Scope of Risk the industry itself scope of business JOY 23
the industry itself
the industry itself

scope of business

Scope of Risk

Scope of Risk the industry itself scope of business scale of business JOY 24
Scope of Risk the industry itself scope of business scale of business JOY 24
the industry itself
the industry itself
scope of business
scope of business
scale of business
scale of business

Examples of Risk

Market Risk Credit Risk Operational Risk Strategic Risk Reputational Risk Basel II Accord
Market Risk
Credit Risk
Operational Risk
Strategic Risk
Reputational Risk
Basel II Accord
Risk Strategic Risk Reputational Risk Basel II Accord Market Risk Credit Risk Operational Risk Strategic Risk
Market Risk Credit Risk Operational Risk Strategic Risk Reputational Risk Financial Risk Technical Risk et
Market Risk
Credit Risk
Operational Risk
Strategic Risk
Reputational Risk
Financial Risk
Technical Risk
et cetera

Home Assignment 2 :

Home Assignment 2 : Submission date  Hard copy  Saturday / September 17 t h

Submission date Hard copy Saturday / September 17 th 2011

GROUP

1.

Define your own risk as a student (around 5 risks).

2.

Describe the definitions of risk that listed in page 25 (in this slide)

3.

Find 5 types of risk and its definition that different with risks in page 25 (in this

slide) (each group should not have same type of risk)

4.

Find 3 definitions of Risk Management and its definition (each group should not have same type of risk)

Term of Reference (TOR) of Home Assignment :

Term of Reference (TOR) of Home Assignment :

Type your assignment using :

type of fonts : any , size : 11

paragraph : 1.5

paper : A4

In the cover of your assignment, write down :

Individual assignment : name of the assignment, name, class, npm

Group assignment : name of the assignment, name of group, class, name and npm of each member of group

Every group assignment should be ready to be presented in front of the class, so it means prepare your presentation deck.