Page 15 - RMAI July-September 2018

July - September 2018

ENTERPRISE RISK MANAGEMENT

CONCEPTS TOOLS STRATEGIES AND IMPLEMENTATION
A. Ramachandran,
GM & Director(Retd),
United India Insurance Company Ltd., Chennai.

INTRODUCTION deal with products and funds, there are considerable
risks present in the work-place or domestic
RISK is present everywhere and derives from the
term“unpredictability”. When life itself is uncertain, situations.
nothing else in life can be certain and even the best WHAT IS “RISK” ?
laid plans undergo alterations midway and needs to The Oxford English Dictionary defines the term “risk”
be re-designed, altered and recast. Organizations are as: “a chance or possibility of danger, loss, injury or
constituted of people, systems, drawings, control,
other adverse consequences” and the definition of
materials, equipment, working tools and tackle and of “at risk” is “exposure to danger”. In this context, “risk”
course materials and methods and procedures and is used to signify negative consequences. But a risk
face a very wide range of speculations, change in
plans, theories and risks that can impact the outcome does not necessarily connote negative outcomes and
of their operations. Business transactions on a global can take many forms.
scale, apart from transnational movement of raw Whatever it be, a risk can also suggest how toinvent,
materials and finished goods, have today to face risks improvise, throw up impromptu and extempore
of massive proportions such as terrorism, pandemics, opportunities on the spur of the moment. The
trade sanctions, smuggling of men and materials Cambridge Dictionary defines “risk analysis” as a
across borders, abduction of young girls and boys for “methodical investigation process undertaken to
ransom and credit crunches are deployed, not to assess the financial and physical affecting a business
speak of periodical inspection by banks how the funds risk”.
provided by them are deployed.
Take the example of owning a motorcar. For most
Even well planned enterprises go very often awry people, owning a motorcar is an opportunity to be
because of delay in supply of raw materials, logistics more mobile and gain the related benefits. However,
and problems in distribution of finished products, there are uncertainties in owning a car. We are
strikes by workers, logistic calculations in marketing responsible for maintaining the car and repair any
and even changes in government policy. However, as damage to the car at our expense. We have to pay
every black cloud has a silver lining,every downside in road tax at regular intervals and also pay for gasoline.
business also provides information on new and Finally, motorcars can be involved in accidents, so
valuable opportunities and a la carte avenues that there are obvious negative outcomes that can occur
could be planned and executed. Many of today's
like paying for third party damages.
industrial ventures and household ways of working
were born out of adversity. “Risk'”has various meanings, depending on the
situation. When a person says he bets on a race horse,
Risk management provides a framework for he says he is taking a risk. When a person who is late
organizations to deal with, defend and react to events
which spring forth all of a sudden and helps the and is rushing to a railway station to catch a train says
modern practice of coming to terms with risks in a he is taking a risk, as he may miss the train. When a
systematic and comprehensive approach, drawing patient is admitted in a hospital for a surgery for a
from their experience and from transferable tools and serious ailment, people say he/she is taking a risk.In
techniques. all these examples, what characterizes “risk” is
“uncertainty”.
Whether they are individuals whose personal
activities range from those associated with work or Risk, which is defined as uncertainty, is a simple
personal financial decisions, or organizations which concept, a way of thinking through planning a

14 RISK MANAGEMENT ASSOCIATION OF INDIA