Risk management

Prepared by Id no
- Abigael Alemayehu BEE/9901/2011
 Abigiya Bahiru BEE/9901/2011
 Andualem Nigusse BEE/9901/2011
 Biruk zewde BEE/9901/2011
 Dawit awoke BEE/9901/2011
 Bethelhem goche BEE/9901/2011
 Amanuel worku BEE/9901/2011
 Billal beshir BEE/9901/2011
 Ayalnesh alem BEE/9901/2011
 Kidist shewangzaw BEE/9901/2011
 Amanuel desta BEE/9901/2011
- Henok shewatatek BEE/3195/09
Definition of risk management
Risk management is the process of making and carrying
out decisions that will minimize the adverse effects of risk
on an organization.
It is the process of identifying, assessing and controlling
threats to an organizations capital and earnings.
it is a process that allows individual risk events and
overall risk to be understood and managed proactively,
optimizing success by minimizing threats and maximizing
opportunities and outcomes.
Objective of risk management
It identifies and evaluates risk.
It identifies and analyzes various risks. associated with
business.
Reduce and eliminate harmful threats
Supports efficient use of resources.
Reassures stakeholders.
Support continuity of organization.
Risk management process
The risk management process is a framework for the
actions that need to be taken. There are five basic steps:
 Identify the risk: this is the first step to identify the risks
that the business is exposed to in its operating environment.
To start this process, list out any and all events that would
have a negative impact on your business.
 Analyze the risk: once the risk has been identified it needs
to be analyzed, the scope of the risk must be determined. It
is also important to understand the link between the risk
and different factors within the organization.
Cont’d…
Evaluate or rank the risk: risks need to be ranked and
prioritized, it is important to rank risk b/c it allows the
organization to gain a holistic view of the risk exposure of
the whole organization.
Treat the risk: every risk must be eliminated or contained
as much as possible. This is done by connecting with the
experts of the field to which the risk belongs. The
discussion regarding the risk and its possible solution can
take place from within the system.
Cont’d…
 Monitor and review the risk: not all risks can be
eliminated some risks are always present. Under manual
systems monitoring happens through diligent employees,
under a digital environment the risk management system
monitors the entire risk framework of the organization and
computers are also much better at continuously
monitoring risks than people.
Risk financing tools
Risk financing is the determination of how an
organization will pay for loss events in the most effective
and least costly way possible.
Risk financing is concerned with providing funds to cover
the financial effect of unexpected losses experienced by a
firm.
Risk financing is designed to help a business align its
desire to take on new risks to grow, with its ability to Py
for those risks.
Cont’d..
Risk transfer tools:
 Risk transfer – enables an organization to transfer its financial
responsibility to pay for potential loss the insurers. It can be defined as a
mechanism of risk management that involves the transfer of future risks
from one person to another.
 Risk retention: use of an organization internal funds or funds from its
group of companies to finance the loss. It is the practice of setting up a
self-insurance reserve fund to pay for losses as they occur, rather than
shifting the risk to an insurer or using hedging instruments.
 Hybrid techniques: involves the combination of internal and external
sources of funds to pay for he loss. These are designed to transfer only
part of the risk of loss to an insurer while the organization retains the
balance of the exposure.