Risk Management System Report: Airline Company, Swinburne University

This report presents a comprehensive analysis of a risk management system tailored for a newly established airline company. It begins by defining risk and the importance of risk management systems in mitigating potential financial losses, injuries, and damages. The report categorizes risks into financial, business, and non-business risks, emphasizing the need for a robust risk management plan. The core of the report focuses on designing a risk management plan for the airline, detailing the risk management process, including risk identification through interviews, historical records, and expert judgment; risk analysis using quantitative and qualitative methods; risk treatment strategies such as avoidance, reduction, sharing, and retention; and the continuous monitoring and review of the risk management system's effectiveness. The report provides a practical framework for identifying, assessing, and controlling various threats to the airline's operations, ensuring profitability and continuity.

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Risk management system
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Risk management system
Risk refers to the uncertainty of an occurrence which result to financial loss, injury or
damage to the object subjected to the occurrence. Therefore, risk management systems can be
described as the process of identifying, assessing and controlling various threats to the business’
operational activities like financial resource, human and other resources involved in the
production and operation process within the organization. (Bromiley, et al, 2015, pg. 275).
Risk is categorized into three groups based on the impacts on operation and production
activities to the organization that is financial risk, business risk and lastly non-business risks.
Financial risk is associated with financial loss to the business upon its occurrence hence it causes
capital loss to the operation of the business while the business risk is types of risks which are
taken up by the business enterprise themselves in attempt to maximize shareholder profits and
value. For instance, a business taking high-cost risks while marketing its new product to the
audience to gain high profits. (Falkner and Hiebl, 2015, pg. 133).
Non-business risk is a type of risk that is not under the control of the firm. They arise due
environmental influence. They are caused by political and economic imbalance.
The thesis of the term paper presented entails risk management plan for the newly started
airline company to aid in identification, control and treatment of various risks associated with
flight management.

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Risk management plan
The risk management plan for the Australia airline company is very essential for the
management body since most common risk associated with flight operation includes economic
risk, legal risk, compliance, reputation and strategy risk hence a well-defined management and
treatment plan for risks are necessary.
In managing risk related to Airline Company’s operation, risk manager has the responsibility
to design a risk management plan to manage speculated risk to the company. Risk management
process includes steps like risk identification, analysis of the related risk, evaluation of risk,
treatment of the identified risk and lastly monitoring the process of the management plan.
(Farrell and Gallagher, 2015, pg. 655).
Risk identification
This is the first step in the risk management process. The risk manager will be expected by
the management body and the stakeholders of the airline company to identify the potential risk
associated with the operation of the company. Risk identification process can be defined as the
process of listing possible company risks and their characteristics.
In identifying the potential risks associated with the flight management, risk manager is
expected to design various techniques which he may apply in identifying potential risk within the
company. The designed techniques for identification of risk are discussed in the context below.
(Giannakis and Papadopoulos, 2016, pg. 473).

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Interviewing
The interview process involves asking questions to members of the organization on the
possible risk factors they may see in their areas of specialization. This technique is more
effective in a large organization where there is a large number of employees. The formulated
questions are based on the potential risk to the organization.
Historical records
Risk manager assembles some of the old records on the possible risks like books defining the
potential risk to the airline company thus identifying risk form those records.
Expert judgment.
Risk manager can also gather information on the possible risk associated with company
operations that is flight operation by consulting experts on their view about the potential risk.
Expert judgment on the potential risk is more accurate since experts are familiar with the risk
identification process.

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Risk analysis
This is the process of identifying and analyzing possible issues which might negatively
impact the operation of the company. The analysis of risk enables risk manager to identify and
estimate the potential loss the risk will impose on the company upon its occurrence. Analysis of
the potential impact of the risk upon its occurrence is categorized into two categories that are
quantitative analysis and qualitative risk analysis process. The identified categories will aid the
manager to identify the potential impact or loss the company is likely to incur upon the
occurrence of the identified risk. (Hammer, 2015, pg. 15).
Quantitative risk analysis.
Quantitative risk analysis involves further analysis of risk according to their order of
priority therefore, they are assigned a numerical quantitative rating to develop the likelihood of
occurrence of the most prioritized risk. The main benefit of the quantitative risk approach is to
enable risk manager to determine the chance of achieving specific project objectives. This is
made possible by further risk analysis and priorities given to the risk based on their chances of
occurrence. (Grote, 2015, pg. 77).
Quantitative risk analysis will also help risk manager to quantify the magnitude of the risk
and to estimate the impact of the analyzed risk to the company by determining the size of the
cost involved sol as to scheduled management plan that may be needed.

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Qualitative risk analysis.
Qualitative risk analysis is one of the techniques employed by the risk manager to quantify
risk related to a particular hazard. It is mostly used in uncertain events or occurrence that have
numerous outcome or impacts resulting in the significant consequences.
The main objective of qualitative risk analysis is to improve his understanding and to identify
main risk exposure areas within the business.
Risk treatment
Risk treatment is defined as the process of selecting and implementing measures to control
or reduce the impact of the identified risk event on the operational activities of the organization
upon the occurrence. Risk treatment measure is essential for the profitability and continuity of
the organization as it reduces or completely control the impact of the potential risks to the
organization.
Risk treatment methods that are designed by risk manager of the company include avoidance,
reduction, sharing and retention that is to accept and budget for the risk when they occur. The
mentioned risk treatment methodologies are discussed in the context as follows.
Risk avoidance
Risk avoidance can be defined as avoiding hazards, activities or exposures which can
negatively impact the activities of the company upon their occurrence. Avoiding risk by the
management body and stakeholders is one of the most preferred risk treatment methods since the
organization will concentrate on eliminating any factors which can result in the occurrence of the
identified risk. (Ho, et al, 2015, pg. 5035).

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Risk avoidance practices include wearing of protective clothing while handling harmful
products, use of reflectors which are visible from a distance to avoid accidents and also training
the staff on basic skills they might need in operation of the production machines. Such practices
will help the company to save on the cost of handling the risk upon their occurrence. For
instance, the use of protective gears and clothing will save the company from incurring a
financial expenses which they will use to treat and compensate the employee upon injury while
at work.
Risk reduction
This entails systematic approach in identifying, assessing and reducing the risk when it
occurs. Risk reduction method is aimed at reducing the financial impact of the risk to the
company. A risk manager is expected to develop some reduction strategies like risk mitigation
which entails risk-sharing and elimination to reduce the financial impact that particular risk
would have caused the company. (Kliem and Ludin, 2019, pg. 32).
Risk-retention
Risk-retention method involves a company’s decision to take full responsibility for the
outcome caused by the identified uncertainty as opposed to risk transfer decision. The company
through its management body and the stakeholders can decide to retain risks when they are
certain that the cost of retention will be lower than insurance cost.

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Risk sharing
This is the practice of distributing risk among the departments, teams and staffs members.
For instance, when the company buys an insurance cover from the insurance firms, the risk will
be transferred to the insurance company hence when it occurs, the insurance company will take
full responsibility of retaining such risk on behalf of the company. (Van Staveren, 2018, pg.
509).
Monitoring the risk management system
This is the process of monitoring and reviewing the implementation of the risk management
plans identified by the risk manager to the company. This is achieved through tracking the
identified risks, conducting analysis on the new risks and also evaluation of the identified risk
management plan based on their effectiveness on the company.

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References
Bromiley, P., McShane, M., Nair, A. and Rustambekov, E., 2015. Enterprise risk management:
Review, critique, and research directions. Long range planning, 48(4), pp.265-276.
Falkner, E.M. and Hiebl, M.R., 2015. Risk management in SMEs: a systematic review of
available evidence. The Journal of Risk Finance, 16(2), pp.122-144.
Farrell, M. and Gallagher, R., 2015. The valuation implications of enterprise risk management
maturity. Journal of Risk and Insurance, 82(3), pp.625-657.
Giannakis, M. and Papadopoulos, T., 2016. Supply chain sustainability: A risk management
approach. International Journal of Production Economics, 171, pp.455-470.
Grote, G., 2015. Promoting safety by increasing uncertainty–Implications for risk management.
Safety science, 71, pp.71-79.
Hammer, M., 2015. What is business process management?. In Handbook on business process
management 1 (pp. 3-16). Springer, Berlin, Heidelberg.
Ho, W., Zheng, T., Yildiz, H. and Talluri, S., 2015. Supply chain risk management: a literature
review. International Journal of Production Research, 53(16), pp.5031-5069.
Kliem, R.L. and Ludin, I.S., 2019. Reducing project risk. Routledge.
Van Staveren, M., 2018. Uncertainty and ground conditions: a risk management approach. CRC
Press.
Waemustafa, W. and Sukri, S., 2016. Systematic and unsystematic risk determinants of liquidity
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Issues, 6(4), pp.1321-1327.