With the growing complexity and interdependence of modern business activity, the risk of similar catastrophes occurring again has only increased. These days, companies face environmental risks, product liability risks, project management risks, security risks and many more. These can only comprise of a seemingly endless and depressing list.

In such a scenario, specialised skills are necessary to assess these risks and implement proactive measures to prevent them. It is within this perspective that risk management is identifying itself in a different domain. Being traditionally identified as synonymous with an insurance policy, risk management is starting to evolve in its new role.

The gratitude is due to the multinational risk engineers working in the country who have set themselves into this task of educating the industry in favour of risk engineering by giving them tangible benefits in terms of cost saving factors.

Risk engineers have objectives of identifying, assessing and prioritising and not with the objective of selling insurance but helping the customer with risk transparency and improvement measures. Risk engineers help in identifying the risk gravity. After the gravity of risk has been identified, it is left for the company to decide what level of risk it can tolerate. Throughout the process of risk identification, the client should be involved thoroughly in every stage which will subsequently increase the confidence of the client.

Definition

Risk management is defined as identification, assessment and economic control of those risks that endanger the assets and earning capacity of a business.

Basic activities in any risk management system are:

• Risk Identification
• Assessment Risk
• Control Risk

Risk Management is a process through which the companies control their level of risk and the key elements of an effective risk management programme are: policy, procedures and standards Policy describes the objectives of the Risk Management programme. Procedures determine how the policy will be implemented. Standards provide guidance on particular issues.

A risk can be tolerated if:

• The likelihood of its occurrence is sufficiently remote
• The consequences are not severe.

Risk can be eliminated or reduced by:

• Changes in the processes.
• Transferring all or part of the risk.

Each company’s Risk Management system is different because:

• Their risks are different.
• Operations and organizations are unique.
• Corporate culture is unique

Importance of Risk Management

• Legislation is now more extensive
• Legislation is now more stringent
• Risk Assessment is growing more common in many areas of legislation.

Insurance is more expensive and more difficult to obtain.

• Is no longer the cheap option.
• Open ended cover is no longer widely available.
• Insurance companies like their clients to actively manage their risks.
• It does not compensate the full loss.
• Pay outs may be delayed.

Customer Attitudes

• Corporate customers want to pass on their legal responsibilities to their suppliers.
• Customers are more litigious.
• Shareholders are more aware of the risks.

Management Attitudes

• Management has learned from other firms disasters.
• Companies are becoming professional.
• Becoming global.

Business risks

The first and more traditional type is non-entrepreneurial risk, typically fire, pollution, fraud risks. Companies used to protect against these by buying insurance, which is not a complete protection and is also not the only one the second type of risk is entrepreneurial risk. This occurs when a company builds a new plant, launches a new product or buys a company. If the company gets its forecast wrong, it loses money. There are ways of reducing these risks by way of adopting a proper risk management system