report - risk and its mitigation aviation industry

8/12/2019 Report - Risk and Its Mitigation Aviation Industry

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Risk Assessment and its Mitigation in Aviation

Industry

Research Assignment

Presented to

Mr. Sankarshan Sarkar ,

Faculty, Management of Risk

NIIT University, Neemrana

Raasthan, India

Master of Business Administration

(Finance and Banking)

Pre!ared "y#

Aman chandan

$a%i% &han

M' (urga Prasad

Nayanchand Rao

Nitu Roy



)

Contents

*ontents'''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''')

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INTR-(U*TI-N'''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''

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Anne<ure 8 1''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''':



ABSTRACTThe !ur!ose of this re!ort is to identify, categori=e, measure risks associated >ith the AirlineIndustry' Furthermore, the re!ort also e<!lores suita%le risk management and mitigation

techni?ues for the same'

The o!erational com!le<ity inherent in this %usiness, together >ith the highly regulated andcommercially com!etitive environment of the airline industry, leaves any !artici!ant e<!osed toa various of risks' Many of these risks 8 for e<am!le changes in governmental regulation, actsof terrorism, !andemics and the availa%ility of funding from the financial markets 8 can %emitigated to a certain degree %ut remain largely under the clout of e<ternal factors'

INTRO!CTIONThe civil aviation sector in India had %een gro>ing at a dramatic rate@ ho>ever the glo%aleconomic recession in ): negatively affected this gro>th' (uring fiscal year )BCD, total

!assenger traffic gre> )D') !ercent, >hile cargo traffic gre> 11') !ercent' Thus, risksmanagement and mitigation associated >ith the %usiness needs to kee! !ace >ith this gro>th'

The free market dynamics of the domestic airline industry are driving %usiness model changesat an un!recedented !ace' The introduction of ne> security !rovisions, com%ined >ithescalating fuel costs and consumer uncertainty are forcing radical adustments in the airlineindustry' As a result many airlines have sought the !rotection of "ankru!tcy to identify andremediate %usiness risks in their organi=ations@ this has forced some airlines to e<!lore%usiness restructuring and mergers as an alternative' This %usiness climate re?uires theconsideration of ho> to %alance risks and re>ard, >hile integrating ne> !rocess and o!erations'

"IT#RAT!R# R#$I#%Ta%le 1'1 8 (etails of revie>

&ear Conducted ' etais of studies

OB*#CTI$#Identification, assessment and classification of risks in aviation industry and e<!loring

risk management E mitigation techni?ues for the same'

M#T+OO"O,&The follo>ing methodology is ado!ted to achieve afore said o%ective'



5

1' Identification and assessment of all !ossi%le Risks in Airline industry

)' *ategorical classification of the identified risks

' Measurement of these risks

5' /<!loring various risk management and mitigation techni?ues for dealing >ith

these risks

T&-# OF ST!&This re!ort utili=es ?ualitative measures to achieve its o%ectives and aims to a!!ly

statistical a!!roach as and >hen called for'

ANA"&SIS (uaitati/e and uantitati/e 0 urga1 Naan)

IMP-RTAN*/ -F RI+& MANA3/M/NT

Mismanaging risk can !rove to %e very costly and it is im!ossi%le to avoid all risks' The onlysolution therefore is effective risk management' The essence of risk management lies inma<imi=ing the areas >here >e have some control over the outcome >hile minimi=ing the areas

>here >e have a%solutely no control over the outcome and the linkage %et>een effect andcause is hidden from us'

The under!inning of an effective risk management !rogram is a thorough understanding of therisks, or the uncertainties, that a %usiness faces and >here and ho> they arise are noted %elo>'

+ources of uncertainty#1' /nvironmental Risk# Includes /conomy Risks and Industry risks)' Process Risk# Includes com!any s!ecific risks' Information for (ecision making risks

IDENTIFICATION AND ASSESSMENT OF RISKS



;

The overall risks associated >ith the Airline industry is as identified in ta%le 1'1'

The most %asic tool is the risk matri< sho>n in figure 1')' It assesses t>o items# the likelihood ofan event occurring and the conse?uence of that event'

A sam!le risk assessment matri< can %e used to differentiate a high risk and lo> risk event'Further, the mitigation is !lanned as !er the !ro%a%ility of occurrence of an event leading tosuch risk and the severity of the conse?uence of risk' The follo>ing guidelines have %een usedfor making assessments of likelihood of an event that leads to risk'

• Pro%a%le 8 an event that occurs several times

• -ccasional C an event that !ro%a%ly occur some time

• Remote 8 an event is unlikely to occur, %ut is !ossi%le

• Im!ro%a%le 8 even is highly likely to occur

Furthermore, guidelines that have %een used for making assessments of severity of risk is asfollo>s'

• *atastro!hic 8 resulting in fatalities and total loss

• *ritical C that causes severe damage

• Marginal 8 that results minor loss

• Negligi%le 8 that results in negligi%le loss

2the foo3ing diagram is 4ust for reference for us to 3rite more on the risks5



B

The most %asic tool is the risk matri<' Figure 5C1G It assesses t>o items# the likelihood of anevent occurring and the conse?uence of that event'

CLASSIFICATION OF RISKS

The overall risks associated >ith the Airline industry is categorically classified in ta%le 1')'

Matri< Risk !riority matri< is as sho>n in figure 1''

MEASURMENT OF RISKS

0aria%les identified to measure these risks ?uantitatively are as noted %elo>'



D

S ). No . $ a ria ' )e s Me a s ure m e n t - a ra m e te r

1 Firm +i=e Total Assets

) .i?uidity *urret Ratio

Profita%ility PAT, R-*/

5 -!erating .everage Assett Turn over Ratio

; Financial .everage (e%t RatioB -!erating /fficiency Asset turn over ratio

D 3ro>th *hange in /"IT

H 3lo%al +u%!rime crisis +ense<

: "usiness *yclicality .oad Factor

1 Airline +afety 6Accidents9 No' of Accidents re!orted

11 ATF *ost *urrecy Fluctuation 6U+( 0s' INR9

1) Profita%ility ATF /<!ense as a of Total /<!ense

/JP.-RIN3 T/*$NI7U/+ F-R MANA3/M/NT AN( MITI3ATI-N -F RI+&+

/<!loring avenues to manage, mitigate and hedge risks is summari=ed in figure 1'' Riskmanagement focuses on managing uncertainties around !hysical and financial assets'$o>ever, this re!ort is not ust focusing on risk management %ut also on mitigation and hedgingtechni?ues >hich not only !rotect, %ut also create enter!rise value %y lo>ering the effects ofrisk'



H



:

Case Stud6 0 Indi/idua Cases (+a'i')

Case Stud7 0 Indi/idua Cases (Naan)

Case Stud8 0 Indi/idua Cases (Nitu)

Case Stud9 0 Indi/idua Cases (urga)

Case Stud: 0 Indi/idua Cases (Aman)

CONC"!SION (Aman and +a'i')

R#F#R#NC#S

1'

Anne;ure 0 6

report - risk and its mitigation aviation industry

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