Page 19 - RMAI Bulletin July - September 2021

RMAI BULLETIN JULY TO SEPTEMBER 2021

which was developed from this risk management procedure for implementation of Arrears is that
process and loop. whenever Arrears is reported, the concerned
Employee has to enquire within Some hours as to why
Steps in Risk Management Process the delay in repayment occurred.
Step-I: Identify, assess, and prioritize risks:-
The first step in risk management process is to identify Step-IV: Implement and Assign
risks. To identify risks, review organization's activities, Responsibility:-
function by function, process by process, and product When the procedures and policies have been
by product, and ask several questions. Try to find out formulated for mitigating the risk, they have to be
the various events, actions, problems, lapses, or issues implemented by communicating them to the persons
which could have a negative impact on the company. concerned. If the procedure concerns persons working
What is also needed is a proper classification of risks in the back-office, the change in policy and procedure
as Major Risks and risks which fall under them (sub- has to be communicated to him/her. Once the
risks). The level of impact and frequency of the risk procedure has been communicated to the right
should also be assessed. By categorizing and evaluating persons, it must be implemented. This step also
activities according to their risks, one can better involves assigning responsibility and ownership to the
understand risks and can take action to reduce large concerned person to ensure that the risk is minimized.
exposures and avoid losses. For example, the procedure formulated to reduce risk
of robberies is that the Field staff should deposit
Step-II: Develop strategies and policies to money in the bank within 24 hours of collection of
measure risk:- repayments. So here, we are assigning the staff of the
Measuring risk means going through the organization responsibility of depositing the money in the bank on
systems and trying to determine how large an impact time. Once this procedure has been implemented, the
it could have on the company and what their staff will be held responsible for depositing money in
probability of occurring is. We have to study the risk I the bank on time.
the context of Organization. For this, we must take
feedback and opinion of the concerned persons and Step-V: Test Effectiveness and Evaluate
formulate strategies for measuring the risks. We must Results:-
come up some tools or strategies for measuring the So once the risk mitigation strategies and procedures
risks in the functioning of the company. For example, have been in place for a certain period of time, say a
the Arrears is a report which is generated by MIS to quarter, we need to check whether they are actually
alert Branch staff that a particular customer has not helping in reducing the risks, or whether they are
repaid an installment as per his/her repayment creating new problems for the company. We need to
schedule. The Arrears is an example of a strategy test the effectiveness of the risk mitigation strategies
developed to measure the risks. and procedures, and also evaluate their results.

Step-III: Design policies and procedures to Step-VI: Revise Policies and Procedures:-
Mitigate Risk:- So after evaluating the effectiveness of the strategies
Once we decide the strategy, the next step is to design and procedures, and based on our experiences from
the policies and procedures to mitigate the risk. The implementing them, we need to further revise the
previous step required us to design strategies to policies and procedures. It might be observed that the
measure the risk. In this step, we have to develop the risk mitigation strategies and procedures put in place
exact procedures and policies regarding how the earlier are creating further issues in the operations,
strategies will be implemented. and hence, need to be changed. The strategies and
procedures might also not be helping in solving the
In other words, the specifics of the strategy have to original problem. Thus, we need to revise the policies
be decided like who will take ownership for it, when and procedures taking in this feedback. This is the final
and how regularly the procedure has to take place, step in the risk management process. So once the final
who is the reporting officer, etc. For example, the step has occurred and a certain amount of time has

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