Comprehensive Risk Management: Analysis and Implementation

This assignment provides a comprehensive overview of risk management principles and their practical applications within the realm of finance. It addresses key concepts such as pure risk, direct losses, and catastrophic loss events, offering solutions and methods for risk protection. The assignment also explores risk management in different business contexts, including agriculture, manufacturing, distribution, and the restaurant industry. Furthermore, it delves into investment decisions, comparing different projects based on return on investment and initial costs, and discusses the advantages of compound interest. The risk management process is detailed, covering risk identification, analysis, prioritization, assignment of ownership, response, and monitoring. Finally, the assignment differentiates between market and liquidity risk, providing a risk matrix for VIP transportation and medical care, concluding with a list of references.

RUNNING HEAD: RISK MANAGEMENT 0
Risk Management
6/18/2018

RISK MANAGEMENT 1
Question 1
1) Pure risk is defined as:
B) The chance a loss will occur
2) All the following are direct losses except:
C) An apartment must be rented after a house is destroyed by fire
3) All the following are direct losses except:
C) A corporation must pay $1 million in ransom when its CEO is kidnapped
4) Which of the following is not an example of a Catastrophic Loss Event?
B) Donald Trump assigned president of the United States
5) Which of the following is not a method of protection of risk?
D) Humanitarian aid
6) Which of the following is not a hazard?
D) Getting shot accidentally while deer hunting
Question 2
1. In case of growing or harvesting, fire is a major risk. It damages a significant portion of
crop and machines. The fire risk could be reduced by taking crop insurance so that the loss
could be recovered after the fire.
2. A manufacturer faces the risk of increase in cost and not meeting the expenses. It could be
reduced by knowing the customer demand and then manufacturing the products accordingly.

RISK MANAGEMENT 2
3. A distributor faces the risk of exploitation of goods on the way of transportation which
could result to huge loss to the enterprise/organisation. This could be reduced by doing a
proper packaging of the goods.
4. The risk involved in a restaurant is regarding the taste and preference of the customer that
will affect the profit margin and customer base of the restaurant. It could be maintained by
maintaining the proper quality of the food and also maintaining a good service outlet.
5. For a customer risk can be defined as the competition arising in the market for restaurant
chain. It will affect the customer’s choice for a single restaurant. Therefore, it will depend
upon the restaurant to maintain the customer base by enhancing its food quality (Rao and
Schoenherr, pp, 474-483).
Question 3
From the given data it can be identified that project X will be better investment plan as the
return on investment in both the projects are similar i.e. 18000 but the initial investment made
in the project X is 10000 which will cost less to the client (Evert, p, 397).
Question 4
1) The compound interest is termed as better investment option for the client. As the client
earn a double income in this i.e. by earning interest on interest.
2) The risk management process is
Identification of risk: There are several ways to identify the risk. The data is collected in
risk register while going through this step. Brain writing or brainstorming’s are the ways, to
structure a problem.

RISK MANAGEMENT 3
Analyse the risk: After registering the potential risk the next step is to determine the reason
behind occurrence of risk. It is hard to analyse the risk. It is not important that people get
enough information. Instead of data being complex, most industries have good practices
which help them in analysing the risk.
Prioritize the Risk: One needs to evaluate the risk by assembling resources towards
resolving it whenever it occurs. But it could be simply managed by categorising into high,
medium or low risk.
Assign an Owner to the risk: If the risk is not assigned to anybody to have a look over it,
then all the hard work of evaluation and identification will go in vain.
Respond to the risk: This is time to implicate all the planning done yet. First is to identify
whether the risk is positive or negative. It needs to be identified if something could be
exploited for the betterment of project or organisation.
Monitor the risk: Without tracking the initiative of the risk forces cannot be set. The
responsibility of tracking the risk towards progression will be of the person who owns it. But
there should be an updated accurate picture of overall progress of the project to identify and
monitor the risks (Ray, 2017).
3) Market and Liquidity Risk
Liquidity risk: Liquidity risk can be divided into two types: market liquidity risk
(product/asset risk) and funding market liquidity risk (cash-flow risk):
Funding liquidity risk: being the corporate treasure’s chief concern who questions: can they
pay their bills, can they fund their liabilities? Liquidity risk can be indicated by current ratio
or quick ratio.

RISK MANAGEMENT 4
Market risk: the inability to exit any position easily is called market risk. For example, real
state could be owned but owing bad market conditions, the sale price could be imminently at
‘fire sale’. The asset might have value, but the value could not be realized as a temporary
evaporation of buyers has been faced (Ou and Musa, pp, 25-34).
Question 5
Risk
Description
Risk Impact Type of
Risk
Rank Severity Contingency
and solutions
VIP
transportatio
n
Affect the
market
value
High 2 Will lead to
big trouble
Acceptable
Risk
Medical care Will lead to
a non-social
operation
Moderate 3 Negligence
on the part
of project
manager
Non-
transferable
risk
Clothing Not much Moderate 4 Negligence Transferable
Security Negative
impact in
terms of
care
High 1 Can lead to
major loss if
any mis-
conduct
occurs
Acceptable

RISK MANAGEMENT 5
References
Bangia, Anil, Diebold, FX., Schuermann, T., and Stroughair, J. "Modeling liquidity risk with
implications for traditional market risk measurement and management." 2008. Print.
Ray, Stephanie. 6 steps in risk management process. Oct. 2017.
<https://www.projectmanager.com/blog/risk-management-process-steps>.
Tang, Ou, and S. Nurmaya Musa. "Identifying risk issues and research advancements in
supply chain risk management." International journal of production economics, 133(1),
2011, pp, 25-34.
Tummala, Rao, and Tobias Schoenherr. "Assessing and managing risks using the supply
chain risk management process (SCRMP)." Supply Chain Management: An International
Journal, 16(6), 2011, pp, 474-483.
Wipplinger, Evert. "Philippe Jorion: Value at Risk-The New Benchmark for Managing
Financial Risk." Financial Markets and Portfolio Management, 21(3), 2007, p, 397.
Zhao, Shengdong, and Ravin Balakrishnan. "Simple vs. compound mark hierarchical
marking menus." Proceedings of the 17th annual ACM symposium on User interface
software and technology. ACM, 2004. Print.