Page 18 - RISK Management IC 86
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Risk Management
Basic components of a risk management process
Identification The recognition / anticipation of risks that
threaten the assets & earnings of a business
enterprises,
Evaluation/ Estimating the likely probability of a risk
Assessment: occurrence & its likely severity
Prevention Measures to avoid occurrence of risk, limit its
& Control severity & reduce its consequences,
Financing Determining what the cost of risk is likely to be
or might be & ensuring that adequate financial
resources are available.
Possible contributions of risk management to a business
l Risk Management can make the difference between survival
and failure.
l Profits can be improved by reducing expenses as well as
increasing income,
l Risk Management can contribute directly to business
profits in at least six ways:
i) Gain peace of mind and confidence
ii) Improves the quality of the decisions
iii) Handle the speculative risk more wisely and more
efficiently.
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