Crisis and Risk

management
 Introduction to crisis management
What is Crisis
 A sudden and unexpected event leading
to major unrest amongst the employees
at workplace called as organization crisis.
 Why crisis?
• Technological failure and Breakdown of machines lead to crisis. Problems in internet,
corruption in the software, errors in passwords all result in crisis.
• Crisis arises when employees do not agree to each other and fight amongst themselves.
Crisis arises as a result of boycott, strikes for indefinite periods, disputes and so on.
• Violence, thefts and terrorism at the workplace result in organization crisis.
• Neglecting minor issues in the beginning can lead to major crisis and a situation of
uncertainty at the work place. The management must have complete control on its
employees and should not adopt a casual attitude at work.
• Illegal behaviors such as accepting bribes, frauds, data or information tampering all lead
to organization crisis.
• Crisis arises when organization fails to pay its creditors and declares itself a bankrupt
organization.
 What is crisis management?
• The art of dealing with sudden unexpected events which
disturbs the employees, organization as well as external
clients.
• Defines as the ability to creatively make major tactical
decisions in irregular, unstable and intricate
 Types of crisis
• Natural crisis
• Technological crisis
• Confrontation crisis
• Crisis of malevolence
• Crisis of Organizational misdeeds
 Crisis of skewed management values
Crisis of deception
Crisis of management misconduct
• Workplace violence
• Rumours
• Bankruptcy
• Natural factors
• Sudden crisis
• Smoldering crisis
 3 stages of crisis

Diagnosis of
Planning
crisis

Adjusting to
changes
 Introduction to Risk Management
 What is Risk management
It is formally defined as the process by which an
organization assesses and addresses its risks;
  It is a technique of controlling and avoiding threats to
business organization;
It involves determining, analyzing and moderating
harmful risk to an organization’s capital and earnings;
 Historically, the role of risk management has been
associated with insurance-buying, occupational safety
and health, and legal liability management.
In recent years managers and physicians alike have
begun to recognize that organizational risks are
universal, that these risks are extraordinarily diverse
and complex, and that these risks are not just confined
to "insurable" or accident-related situations.
 They may include risks arising from actions of
regulatory bodies, third party payers, hospitals,
partners, and employees, in addition to the physiatrist's
personal or business investment, management and
clinical practice.
 Additionally, changing customer and patient
preferences and/or expectations make the assessment
of risk an even more dynamic and continuous process.
Besides, it describes the formal risk management
process and suggests ways that physiatrists can
apply risk management to their business and clinical
practice.
Furthermore, Risk management is a practice which is
required and followed by every business irrelevant of
their size and nature. It aims at recognizing the
potential threats in advance and takes all necessary
steps to avoid their adverse effects on business
operations.
 In developing this justification, business managers &
physiatrists with their office managers will learn about the
overall goals and objectives of risk management, the
challenge of identifying and dissecting risks, the tools and
handling options available, and the means by which risk
management efforts are effectively implemented.
 Definition of Risk Management according to:

 “Risk management is the process by which various risk

exposures are identified, measured, and controlled. Our
understanding of risk has been much improved by the
development of derivatives markets”. According to Jorion
“Risk refers to relatively objective probabilities which can
be computed based on experience or some prior principle”.
According to Haynes & Paul
 Objectives of Risk Management

1. Develop a common understanding of risk across

multiple functions and business units so we can manage
risk cost-effectively on an enterprise wide basis.
2. Achieve a better understanding of risk for competitive
advantage.
3. Build safeguards against earnings-related surprises.
4. Build and improve capabilities to respond effectively to
low probability, critical, catastrophic risks.
5. Ensure the management of risk is consistent with and
supports the achievement of the strategic and corporate
objectives.
6. Initiate action to prevent or reduce the adverse effects
of risk.
7. Minimize the human costs of risks, Where reasonably
practicable.
8. Meet statutory and legal obligations.
9. Minimize the financial and other negative consequences
of losses and claims.
10. Minimize the risks associated with new developments
and activities.
11. Be able to take informed decisions and make choices
on possible outcomes.
 Five Importance of Risk Management (NBH)
(Why we need to study Risk Mgt.)

“a process, achieved by the entity’s board of

directors, management, and other personnel,
applied in strategy-setting and across the
enterprise, designed to identify potential events
that may affect the entity, and manage risk to be
within the risk appetite, to provide reasonable
assurance regarding the achievement of
 1. Formation of a more Risk Focused Culture for the
organization
Organizations that have implemented ERM note that
increasing the focus on risk at the senior levels results
in more discussion of risk at all levels.
The resulting cultural shift allows risk to be considered
more openly and breaks down silos with respect to
how risk is managed.
ERM- Enterprise Risk Management
 2. Standardized Risk Reporting

Standardized reports that track enterprise risks can improve

the focus of directors and executives by providing data that
enables better risk mitigation decisions.
The variety of data (status of key risk indicators, mitigation
strategies, new and emerging risks, etc.) helps leadership
understand the most important risk areas. 
 3. Improved Focus and Perspective on Risk

Organizations need to develops leading indicators to help

detect a potential risk event and provide an early warning;
Key metrics and measurements of risk further improve the
value of reporting and analysis and provide the ability to track
potential changes in risk vulnerabilities or likelihood,
potentially alerting organizations to changes in their risk
profile.
 4. The Efficient Use of Resources

In organizations, many individuals may be involved with

managing and reporting risk across operational units.
We need to develop a program like ERM program which
does not replace the need for day to day risk management, it
can improve the framework and tools used to perform the
critical risk management functions in a consistent manner.
Eliminating redundant processes improves efficiency by
allocating the right amount of resources to mitigating the risk.
5. The Effective Coordination of Regulatory
and Compliance Matters
Bond rating agencies, financial statement auditors, and
regulatory examiners, have begun to inquire about, test, and
use monitoring and reporting data from ERM programs.
Since ERM data involves identifying and monitoring controls
and mitigation efforts across the organization, this information
can help reduce the effort and cost of such audits and reviews.