RMI-2302 Lecture Notes - Lecture 1: Income Statement

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Definition of Risk Management
-Don’t risk more than you can lose
-Don’t risk a lot for a little
-Consider the odds
The Risk Management Process
1. Determination of objectives
2. Identification of risks
3. Evaluation of risks
4. Consideration of alternatives - selection of the tool
5. Implementing the decision
6. Evaluation and review
Step 6: Evaluation and Review
-In theory, the evaluation and review are the final step in the risk management process
-Except in the rare case where an organization is newly created, every organization will have
a risk management program already in existence.
-Reevaluate program’s objectives
-Repeat identification process to assure that it was performed correctly
-Evaluate the risks that have been identified
-Verify that the decision on how to address each risk was proper
-Verify that the decision was properly executed.
Post-Loss Objectives Pre-Loss Objectives
Survival Economy
Continuity of Reduction in Anxiety
Operations
Earnings Stability Meeting Externally Imposed Obligations
Continued Growth Social Responsibility
Social Responsibility
Step 2: Identification of Risk
-There are a variety of tools available to assist in risk identification including questionnaires,
checklists, and procedure guides
-The preferred approach to risk identification is a “combination approach, in which all of the
tools available are brought to bear on the problem.
Inspections
-Just as one picture is worth a thousand words, one inspection tour may be worth a thousand
checklists
-An examination of the various operation sites of the firm and discussions with managers and
workers will often bring attention to risks that might otherwise have been undetected.
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