Risk Management Submitted to:

Sir Nasir AbbasSubmitted by:

M.Azhar 4573 Shahid Naseer

4577 Talha Tahir

4580 Numan Anwar 4591 Sohial jabbar

4598 Hafiz Abu Bakar

4609 Hafiz Usman

4618

Definition of Risk: Risk implies future uncertainty about deviation from expected

earnings or expected outcome.Definition: Risk implies future uncertainty about deviation from expected earnings or expected outcome. Risk measures the uncertainty that an investor is willing to take to realize a gain from an investment. 

Description: Risks are of different types and originate from different situations. We have liquidity risk, sovereign risk, insurance risk, business risk, default risk, etc. Various risks originate due to the uncertainty arising out of various factors that influence an investment or a situation.

Why Taking Risks:If you ever want to achieve the life you’ve always

dreamed of, you’ll have to start taking positive, calculated risks. It is absolutely necessary to take chances to achieve anything great in life, however many are scared to take the initial leap.

As with any risk, there is always something at stake. In most instances, when it comes to your business, you stand to lose money, time and your reputation. Which are also the very same things you stand to gain! The benefits of taking risks will enrich your life and make your business or career much more rewarding.

One of my clients worked for the government for 15 years before deciding to start his own business. I helped him pinpoint his true passions and create a plan to profit from them. After moving to a new state, instead of searching for another civil servant position, he took his skills and experience of being an urban planner and translated them into a viable business for himself. Nervous about launching out on his own, he expressed this was the biggest risk he had ever taken and worried about where the income and clients would come from. However, after being in business for one year, he has already landed multiple contracts and generated a six-figure income. After taking the risk of quitting his job and launching his own firm, he’s much happier and experiencing life on a new level

THE BENEFITS OF TAKING RISKS:Taking risks opens you up to new challenges and

opportunities. Push yourself to learn a new skill, such as public speaking, which comes in handy as a business owner.

Taking risks empowers you to establish new limits in your mind. We all have boundaries or a comfort zone where we’d like to stay and many have misconstrued visions of what we think we deserve or are capable of accomplishing. When you take risks, you can eradicate that thinking, establish new boundaries, improve your outlook on life and your ability to achieve on high levels.

Taking risks can cause you to become more creative. When you put yourself out on a limb, with a no-excuse approach, your natural problem-solving skills kick in and you’re open to new ideas and are willing to try something new.

Taking risks can result in a positive outcome. Not every life step can be carefully planned out. You’ll never know if you can succeed unless you venture out into new territory. Is there a risk involved to do something totally new? Sure. But the reward is there too. When you give it your best shot and put all that you can into achieving the goal, you are more likely to make it happen.

Taking risks help you to clearly define what you really want. Calculated risks are taken with careful thought. Yet the fact that you are taking a risk pushes you to make things work. Surely you will first have to determine if the reward is something you really want enough to take the chance. If it is, then move ahead and don’t look back.

Once you have become accustomed to taking risks, you break free from the average way of living and thinking. Instead of fighting to stay safe you gain the momentum and confidence needed to welcome new opportunities in your career or business. Risks build your self-confidence and self-respect, empowering you to feel stronger and more confident in taking on new endeavors. When you are open to new challenges you position yourself to profit a whole lot more than you would just staying the same.

Definition of 'Risk Averse‘

A risk averse investor is an investor who prefers lower returns with known risks rather than higher returns with unknown risks.

Definition: A risk averse investor is an investor who prefers lower returns with known risks rather than higher returns with unknown risks. In other words, among various investments giving the same return with different level of risks, this investor always prefers the alternative with least interest.

Description: A risk averse investor avoids risks. S/he stays away from high-risk investments and prefers investments which provide a sure shot return. Such investors like to invest in government bonds, debentures and index funds.

Definition of risk exposure:

The quantified potential for loss that might occur as a result of some activity. An analysis of the risk exposure for a business often ranks risks according to their probability of occurring multiplied by the potential loss, and it might look at such things as liability issues, property loss or damage, and product demand shifts.

Risk’s Faced by Firm: Virtually every activity of a company entails exposure to risks.

Taking risk is an essential and inseparable part of business enterprise. Business risk of a company are born by its stakeholders: shareholders, creditors, custmors, suppliers, employees, and government. The financial system can be used to transfer some of the risk faced by company to other parties . Specialized financial firms, such as insurance companies, perform the service of pooling and trensferring risks.

Price Risk: Price risk is the risk of a decline in the value of a security or a

portfolio. Price risk is the biggest risk faced by all investors. Although price risk specific to a stock can be minimized through diversification, market risk cannot be diversified away. Price risk, while unavoidable, can be mitigated through the use of hedging techniques.

Operational Risk:

Operational risk is a form of risk that summarizes the risks a company or firm undertakes when it attempts to operate within a given field or industry. Operational risk is the risk that is not inherent in financial, systematic or market-wide risk. It is the risk remaining after determining financing and systematic risk, and includes risks resulting from breakdowns in internal procedures, people and systems.

Economic Conditions:Economic conditions are the state of the economy in

a country or region. Economic conditions change over time in line with the economic and business cycle, as an economy goes through expansion and contraction. Economic conditions are considered to be sound or positive when an economy is expanding, and are considered to be adverse or negative when an economy is contracting. A country's economic conditions are influenced by numerous macroeconomic and microeconomic factors, including monetary and fiscal policy, the state of the global economy, unemployment levels, productivity, exchange rates, inflation and so on.

Political Risk:

The risk that an investment's returns could suffer as a result of political changes or instability in a country. Instability affecting investment returns could stem from a change in government, legislative bodies, other foreign policy makers, or military control. 

Political risk is also known as "geopolitical risk," and becomes more of a factor as the time horizon of an investment gets longer.

Environmental Risk:

can be defined as the “actual or potential threat of adverse effects on living organisms and the environment by effluents, emissions, wastes, resource depletion, etc., arising out of an organization's activities.

Project risk:

 Is an uncertain event or condition that, if it occurs, has an effect on at least one project objective. 

Risk management focuses on identifying and assessing the risks to the project and managing those risks to minimize the impact on the project.

Reputational risk:

Often called reputation risk, is a risk of loss resulting from damages to a firm's reputation, in lost revenue; increased operating, capital or regulatory costs; or destruction of shareholder value, consequent to an adverse or potentially criminal event even if the company is not found guilty.

The Risk Management Process:All risk management processes follow the same basic

steps, although sometimes different jargon is used to describe these steps. Together these 5 risk management process steps combine to deliver a simple and effective risk management process.

Step 1: Identify the Risk. You and your team uncover, recognize and describe risks that might affect your project or its outcomes. There are a number of techniques you can use to find project risks. During this step you start to prepare your Project Risk Register.

Step 2: Analyze the risk. Once risks are identified you determine the likelihood and consequence of each risk. You develop an understanding of the nature of the risk and its potential to affect project goals and objectives. This information is also input to your Project Risk Register.

Step 3: Evaluate or Rank the Risk: You evaluate or rank the risk by determining the risk magnitude, which is the combination of likelihood and consequence. You make decisions about whether the risk is acceptable or whether it is serious enough to warrant treatment. These risk rankings are also added to your Project Risk Register.

Step 4: Treat the Risk: This is also referred to as Risk Response Planning. During this step you assess your highest ranked risks and set out a plan to treat or modify these risks to achieve acceptable risk levels. How can you minimize the probability of the negative risks as well as enhancing the opportunities? You create risk mitigation strategies, preventive plans and contingency plans in this step. And you add the risk treatment measures for the highest ranking or most serious risks to your Project Risk Register.

Step 5: Monitor and Review the risk:

 This is the step where you take your Project Risk Register and use it to monitor, track and review risks.

Risk is about uncertainty. If you put a framework around that uncertainty, then you effectively de-risk your project. And that means you can move much more confidently to achieve your project goals. By identifying and managing a comprehensive list of project risks, unpleasant surprises and barriers can be reduced and golden opportunities discovered. The risk management process also helps to resolve problems when they occur, because those problems have been envisaged, and plans to treat them have already been developed and agreed. You avoid impulsive reactions and going into “fire-fighting” mode to rectify problems that could have been anticipated. This makes for happier, less stressed project teams and stakeholders. The end result is that you minimize the impacts of project threats and capture the opportunities that occur.

Loss Control / Loss Prevention: A risk management technique that seeks to reduce the

possibility that a loss will occur and/or reduce the severity of those that do occur. Also known as risk control or safety. Driver training programs are loss control programs that seek to reduce the likelihood of accidents occurring. Sprinkler systems are loss control devices that reduce the severity of loss by fire.

Risk Retention:

A form of self-insurance employed by organizations which have determined that the cost of transferring a risk to an insurance company is greater over time than the cost of retaining the risk and paying for losses out of their own reserve fund.

Risk Transfer:

Is a risk management and control strategy that involves the contractual shifting of a pure risk from one party to another. One example is the purchase of an insurance policy, by which a specified risk of loss is passed from the policyholder to the insurer.

Reportaing by Board on Risk Management:

All the report is send to upper level management then they male polices to control the risk.

The Role of Government in Risk Management:Government plays an important role in managing risk for the

public at large either by preventing them or redistributing them. People often rely on government to provide protection and financial relief from natural disasters and various human caused hazards, including war and pollution of the environment. An argument in favor of an activist role for government in economic development is that government can readily spread the risk of an investment in infrastructure among all of the taxpayers within its jurisdiction. Government managers often use the markets and other cannels of the financial system to implements their own risk management policies in much the same way that managers of firm and other nongovernmental economic organizations do.

In case of private sector institutions of risk management, the persons seeking cover against a risk pay for the coverage in one form or the other. Much in the same way risk protection offered by government also comes at a price. All risks are ultimately borne by people.

Thank you…..