Page 17 - RMAI July-September 2018

July - September 2018

NATURE OF RISK unsafe pursuits in the hope of winning a jackpot. In
these circumstances the return may not be entirely
Recent events in the world have brought risk into
higher profile. Terrorism, religious extremism, cross- financial, but can be measured in terms of pride, self-
border smuggling of men and materials, abduction of esteem or peer group respect. Undertaking activities
that involve risks of this type where a positive return
young women and children for ransom, tsunami
waves, cyclones, hurricanes, earthquakes and may be expected is referred as taking opportunity
earthquake shocks, floods, drought, landslides and risks.
other climate related events and even global financial ATTITUDES TO RISK
crisis that are facing society, industry and commerce
Different organizations will have different attitudes to
and nations have upset the normal living standards of risk. Some organizations may be considered to be risk
people and nations.These extreme risks occur averse, while other organizations will be risk
recurrently and repetitively among somewhat more
aggressive. To some extent, the attitude of the
mundane risks. Evaluating the range of risk responses organization to risk will depend on the sector and the
available and deciding the appropriate response in nature and maturity of the market place within which
each case is the core of risk management. Responding
it operates as well as the attitude of the individual
to risks should produce benefits for individuals as well board members.
as for organizations both in work-places and
He key factors that will determine the risk attitude of
domestic-situations. For example, many of the
the organization include the stage in the maturity
responses to risk are automatic.
cycle. For an organization that is in the start-up phase,
Evaluating the range of risk responses available and a more aggressive attitude is required than for an
deciding the appropriate response in each case is the
organization that is enjoying growth or one that is a
core of risk management. Responding to risks should
mature organization in a mature market place. Where
produce benefits for individuals as well as for an organization is operating in a mature market place
organizations both in work-places and domestic
and is suffering decline, the attitude to risk will be
situations. For example, many of the responses to risk
much more risk averse.
are automatic like admitting a person who has
collapsed while walking on the road. Ways of avoiding Risks cannot be considered outside the context that
fire and road accidents are based on well-established gave rise to the risks. It may appear that an
and automatic responses. organization is being risk aggressive when in fact the
board has decided that there is an opportunity that
Certain other risks have established responses that
are imposed on us as individuals and/or organizations should not be missed. However, the fact that the
opportunity is high risk may not have been fully
as requirements. For example, in our personal lives
appreciated.
buying insurance for a motorcar is a legal
requirement, whereas buying insurance for our COMPONENTS AND DEGREES OF
residence is often not, but doing so is good risk RISK MANAGEMENT
managementand sensible. As well as hazard and Organizations face a wide range of risks that can
control risks, these are risks that have a positive impact the outcome of their operations. The desired
return. For example, investing money in the stock overall aim may be stated as “a mission or a set of
market is in anticipation of making a profit from the corporate objectives”. The events that can impact an
investment. But placing a bet on a race horse is more a organization may inhibit what it is seeking to achieve
gamble than an investment, as the outcome may be a (hazard risks), enhance their objectives (opportunity
positive payback or the money invested may be a
risks), or create uncertainty about the outcome
dead loss.
(control risks). Risk management needs to offer an
People participate out of choice in motor sports, integrated approach to the evaluation, control and
water sports, horse racing and other potentially monitoring of these types of risks.

16 RISK MANAGEMENT ASSOCIATION OF INDIA