RISK & RISK MANAGEMENT

PRESENTED BY

VARUN RAO
DIPENTI JETHWA
SHAILENDRA BANWANKAR
CONCEPT OF RISK
 Risk is the potential that a chosen action or activity
(including the choice of inaction) will lead to a loss
(an undesirable outcome). The notion implies that a
choice having an influence on the outcome exists
(or existed).
 In finance, risk is the probability that an
investment's actual return will be different than
expected.
RISK MANAGEMENT
 Method of identifying, analysing, treating and
monitoring the risks involved in any activity or
process. the name given to a logical and systematic
method of identifying, analysing, treating and
monitoring the risks involved in any activity or
process.
7 STEPS IN RISK MANAGEMENT
 Defining Objectives of Risk Management
The strategic and organisational context in
which risk management will take place.
For example, the nature of your business, the
risks inherent in your business and your
priorities
Identify Risk Exposures
 Identifying the stakeholders, (i.e.,who is
involved or affected).
 Past events, future developments.
 Financial Statement Analysis.
 Preparing Checklist of Various losses that
may arise due to risk
Analysis of Risks
 Probability and Frequency of happening of
Risk
 Impact or Severity of risk on various

stakeholders.
Evaluate the Risks
Rank the risks according to management
priorities, by risk category and rated by
likelihood and possible cost or consequence.
Determine inherent levels of risk
 Treat the Risks
Develop and implement a plan with specific
counter-measures to address the identified
risks.
Consider:
 Priorities (Long term and Short term)
 Resources (human, financial and technical)
 Risk acceptance, (i.e., low risks)
Document your risk management plan and
describe the reasons behind selecting the
risk and for the treatment chosen.
Record allocated responsibilities, monitoring
or evaluation processes, and assumptions on
residual risk.
 Monitor & Review

In identifying, prioritising and treating risks,

organisations make assumptions and decisions
based on situations that are subject to change,
(e.g., the business environment, trading patterns,
or government policies) Risk Managers must
monitor activities and processes to determine the
accuracy of planning assumptions and the
effectiveness of the measures taken to treat the
risk.
Methods can include data evaluation, audit,
compliance measurement.
Communicate & Consultation
 Consultation with Employees who have
experience of making such financial plan.
 Consultations with Client
Principles of Insurance
 Principle of Utmost GoodFaith
 Under the contract of insurance,the insured is

duty bound to disclose all material facts

relating to the risk to be covered.
Principle of Insurable Interest
 Person should be legally related to the
property or the person which is insured. The
subject matter of insurance can be any type
of property or any event which may result in a
loss of legal right or creation of a legal
liability.
Principle of Indemnity
 On happening of event insured against,the
insured will be placed in the same monetary
position that he or she occupied immediately
before the event.
Principle of Proximate Cause
 It is the cause of loss which when the loss
happened, the insurer can be made liable for
the payment claim.
Principal of Contribution
 Insurers will share total loss according to the
proportion one insurer’s promise bears to
aggregate of all insurer’s promise.
Principle of Subrogation
 Insurance law says that after an insurer has
paid a claim to the insured, he is entitled to
all the rights & remedies of the insured in
mitigating the loss.
Role of Insurance in PFM
 Insurance is an important element of any
sound financial plan. Different types of
insurance protect you and your loved ones in
different ways against the cost of accidents,
illness, disability, and death.
 What Are Your Insurance Needs?
 The insurance decisions you make should be

based on your family, age, and economic

situation. There are many forms of insurance
and, no one-size-fits-all policy.
 Following is a list of the forms of insurance
most people require. 
 Automobile Insurance
 Homeowners Insurance
 Life Insurance
 Liability Insurance
 Disability Insurance
 Health Insurance
 Retirement Plans
Automobile Insurance
 Auto insurance protects you from damage to the
often considerable investment in a car and/or from
liability for damage or injury caused by you or
someone driving your vehicle. It can also help cover
expenses you or anyone in your car may incur as a
result of an accident with an uninsured motorist.
Homeowners Insurance
 Homeowner's insurance should allow you to rebuild
and refurnish your home after a catastrophe and
insulate you from lawsuits if someone is injured on
your property. Coverage of at least 80% of your
home's replacement value, minus the value of land
and foundation, is necessary for you to be covered
for the cost of repairs.
Liability Insurance
 Necessary for high-income individuals and
those with considerable assets 
Life Insurance
 Life insurance, payable when you die, can
provide a surviving spouse, children, and
other dependents with the funds necessary to
maintain their standards of living.
Disability Income Insurance
 A long-term disability policy is activated,
replacing a portion of your lost income, when
you are unable to work for an extended
period. 
Health Insurance
 Most people enjoy medical insurance as an
employee benefit, often with their employers
paying whole or part of the premiums.
Retirement Plans
 With aging & uncertain future retirement
planning has become crucial for Middle aged
people.
CHECKLIST

 Calculate your life insurance income-replacement

needs (the amount of money survivors would require
in order to maintain long-term financial security).
 Make a list of each policy's expiration date. A few
months before those dates, start shopping around for
better deals.
 If your home's value has increased recently,
determine its current replacement value and then
make sure that your home insurance policy would
provide enough money to rebuild.
 Shop around for long-term care insurance and
disability insurance if you don’t have that already.
THANK YOU