MANAGING RISKS- A NEW

FRAMEWORK
ITBM Division C
Group Number - 3

Name PRN Number

Ayush Khandelwal 21030241116

Inderjeet Kaur 21030241129

Nikita Kadam 21030241141

Satyabrata Saha 21030241154

Siddharth Shrivastava 21030241160

Vaidehi Joshi 21030241170

What does the case say?
• When Tony Hayward became CEO of BP, in 2007, he vowed to make safety his top priority.

• Three years later, on Hayward's watch, the Deepwater Horizon oil rig exploded in the Gulf
of Mexico, causing one of the worst man-made disasters in history.

In this article, we present a new

We examine the individual and We conclude by looking at how
categorization of risk that allows
organizational challenges inherent organizations can identify and
executives to tell which risks can
in generating open, constructive prepare for nonpreventable risks
be managed through a rules-based
discussions about managing the that arise externally to their
model and which require
risks related to strategic choices. strategy and operations.
alternative approaches.

MANAGING
RISKS
The first step in creating an effective risk-
management system is to understand the
qualitative distinctions among the types of
risks that organizations face. Research
shows that risks fall into one of three
categories.
CATEGORY 1: PREVENTIVE RISKS
These are internal risks, arising from within the
organization, that are controllable and ought to be
eliminated or avoided.
CATEGORY 2: STRATEGY RISKS
A company voluntarily accepts some risk in order to
generate superior returns from its strategy. A bank
assumes credit risk, for example, when it lends
money; many companies take on risks through their
research and development activities.
CATEGORY 3: EXTERNAL RISKS
Some risks arise from events outside the company
and are beyond its influence or control. Sources of
these risks include natural and political disasters and
major macroeconomic shifts.
MANAGING
RISKS
PREVENTABLE RISKS
The first line of defence against preventable risks is to abide by the guidelines set by the organization.
• The mission statement must be precise enough for the employees and well enough crafted and articulated to deliver what the
organization stands for.
• The organisation's values must highlight its dedication to the stakeholders and their welfare.
• The organizational culture must set clear and firm boundaries regarding what is not allowed.

STRATEGIC RISKS
• Independent Experts - Setting up a risk review board consisting of independent technical experts.
• Facilitators - Businesses may use a very modest central risk-management team that gathers data from operating managers. This gives
decision-makers a complete view of the company's risk profile and raises managers' understanding of the risks that have been
accepted throughout the organisation.
• Embedded Experts - Working side by side with the line managers whose activities are creating new ideas, innovation, risks, and, if
all goes well, revenues and risk management requires embedded professionals within the company to evaluate and influence the
business's risk profile continuously.

EXTERNAL RISKS
• The methods used to manage strategic and preventable risks often cannot be utilised to decrease or eliminate external hazards, the
third category of threat. Companies should concentrate on recognising them, evaluating their potential impact, and determining the
best ways to reduce their consequences should they arise because external risks are mainly outside of the company's control.
Control Model
 Role of Risk Mgmt Staff Function

Relationship of the Risk Mgmt. Function to Business Units

 THE RISK EVENT CARD
VW Brasil uses risk even cards to assess its startegic risks. Here is a sample-
Leadership Challenge

CHALLENGE 1 CHALLENGE 2 CHALLENGE 3 CHALLENGE 4 CHALLENGE 5

Mitigating Risk typically
involves dispersing resources
and diversifying investments ,
just the opposite of the intense
focus of a successful strategy.
Risk function size vary from
company to company and
reporting to top team is also
missing
Reluctancy to spend time and Managers may find it Missing separate function to
money now avoid an antithetical to their culture to handle strategy and external
uncertain future problem that champion process that risk management
might occur down the road identify the risk to the
strategy they helped to
formulate.
THANK
YOU