Page 11 - RMAI BULLETIN Oct - Dec 2019

RMAI BULLETIN OCTOBER TO DECEMBER 2019

Factory, Godown, etc.) and the same is necessary for Manager. It shows both the tangible & intangible
the management of any organization to decide upon consequences of risk and the gamut of functioning of
–the Loss Control (i.e. the physical control of the theRiskManager&thescopeofRiskManagement.Itis
possibility of loss through ensuring risk improvement a matter of common knowledge that risk cannot be
measures&/orlossminimizationmeasures. eliminated completely. Snow will continue to fall,
people will continue to drive cars and fortune will
To understand the purpose of Risk Management let us produce unexpected and unanticipated outcomes. But
takeoneincident- can we not identify such a situation and forecast it and
Dan Hacking, one European city’s Risk Manager, was can we not analyze such a situation and can we not
awakened by a phone call at 2.45 A.M. on a wintry exercise control when such a situation arises or may be
November morning, when that night the first major even before such a situation arises. Well – the answer is
snowstorm of the year had hit the city. Earlier he had obviously –Yes! And to seek the answer we enter into
gone to bed unaware of the storm’s intensity and therealmofRiskManagement.
started to discover that over 21 inches of snow had
fallensince9.00P.M. Risk management is simply a practice of systematically
selecting cost effective approaches for minimizing the
At the other end of the line was the night shift police effect of threat realization to the organization. All risks
officer who explained that one of the city’s snowplows can never be fully avoided or mitigated simply because
had run into a station wagon. The snowplow driver was of financial and practical limitations. Therefore all
not injured but tragically, the three station wagon organizations have to accept some level of residual
passengerswerekilled. risks.

The officer went on explaining that the plow driver was TheProcessofRiskManagement:
discovered to have had a blood alcohol level well in
The process starts with Risk Identification. The very
excess of legal limits and the driver was also operating
basics of RiskManagement rest with the first step – The
the city vehicle with a suspended driver’s license – a
Risk Identification – since ‘Risk’ cannot be managed
suspension handed down six months ago after his
unless identified and it is needed to ensure that the full
eighth conviction. The officer concluded the call by
range of significant risk is encompassed within the Risk
noting that the accident clearly was the snow plow
Management Process. A scientific approach to risk
operator’s fault. The station wagon was parked in a management of pure risks involves a logical sequence
convenience store lot and the plow’s tracks plainly
of several steps. The first step is obviously - Risk
showed that it had drifted off the road over the curb
Identification – which may be denoted as finding the
and a parking barrier, stopping only when it had exposuresofthevariousrisksintoday’sscenario:-
rammed the station wagon into a retaining wall.
Preliminary evidence suggested that the driver had lost
Now-a-days the risks as associated with various
consciousnessbehindthewheel. manufacturing & service oriented industry /
organizations / firms may be depicted as below in
Nowthethoughtsranthroughhismind: figure1:-
1) Howwastheguyeverallowedtodriveaplow?
NEW TECHNOLOGY
2) Wasthecityinsuredforsuchloss? NEGATIVE PUBLICITY COMPLIANCE
3) Whataretheneedsofthevictims’families? BRAND VALUE
FAILED ACQUISITIONS
4) Did the city’s lack of a Driver Training Programme BID LOSS OF REPUTATION
RISK
contributetotheaccident? INSOLVENCY
LOSS OF KEY
CUSTOMERS
CUSTOMER
5) What are the public relations implications for the
COMPLAINTS STRIKES
city?
POLITICAL RISK FIRE-LOSS OF PRODUCTION
6) Whatcouldwehavedonedifferently? OR EMBARGO FAILURE OF INSURANCE CAPABILITY
CONTRACT
This story offers a window to the world of the Risk FIGURE 1 - THE RISKS OF THE CURRENT ERA

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