Compiled byBoga Khurairi C1K011007Ilham Perwira Putra C1K011013Sridanti Firdamila N C1K011020Mega Noer Azizah C1K011042Nur Zahroh Hamidah C1K011045

Entreprise Risk Management

RISK MANAGEMENT CONCEPT

RISKThe process of minimizing the probability and severity of an unfavorable outcome at the lowest long-term cost to the organization.

RISK MANAGEMENTRisk management is the process of minimizing the probability and severity of an unfavorable outcome at the lowest long-term cost to the organization.

Enterprise Risk Management(ERM)

Enterprise Risk Management is a common framework applied by business management and other personnel to identify potential events that may affect the enterprise, manage the associated risks and opportunities and provide reasonable assurance that our Company’s objectives will be achieved

RISK MANAGEMENT ORGANIZATION

Risk management organization is a system of management of risks faced by the Organization in a comprehensive manner for the purpose of increasing the value of the company.

Organizational risk management aims at creating a system or mechanism within the Organization so that the risk can be detrimental to the organization can be anticipated and managed for the purpose of increasing the value of the company.

Organizational Risk Management Framework

Soft infrastructure: Risk culture Management support

Hard Infratucture: Information technology Other infrastructure

Process of Organizational Risk Management

1. PLANING: Goal and mission setting Target and decision procedure setting

2. IMPLEMENTATION: Identification and measurement of risk Risk management, assurance, diversification

avoidance Organizational risk management: organization structure, staffing, incentive, .

3. CONTROL:

Evaluation, report, communication, feedback

MAXIMALIZE FIRM VALUE

COMPONENT OF RISK MANAGEMENT

Components of Risk Management

Event Identification & Risk Assessment: As part of the strategic planning process and day-to-day management of the business, functional leaders identify internal and external events that may affect the achievement of our Company’s objectives .Risk management function personnel help identify and assess these risks through their expertise, formal assessments and analysis of business intelligence and trends.

Cont’

Risk Response: A response is determined based upon the overall risk exposure, considered as a function of likelihood and impact of the occurrence .Risk responses may include avoiding or evading, accepting, reducing, and sharing or transferring risk.

Cont’

Information & Communication: Information and communication channels are in place to make the organization aware of risks that fall into their area of responsibility and expected behavior and actions to mitigate negative outcomes .

Con’t

Monitoring: Management reviews, as well as assurance activities, such as testing, auditing and assessments, are in place to ensure that risks are effectively identified and assessed, and that appropriate responses, controls and preventive actions are in place .

Cont’

Control Activities: Control activities are established to ensure that risk responses are carried out effectively and consistently throughout the organization .This involves formalizing risk response in our Company policies, ensuring clear accountability, utilizing self-assessment and monitoring tools and designing controls into our systems and critical business processes

Example

Baring Bank trader (Nick Lesson) buy Japanese stock derivative instruments (Futures Nikkei). Baring Bank was the bank of England. Japanese economy decrease in drastic due to the Kobe earthquake disaster. As a result he suffered heavy losses. The next transaction (sell option) increasingly aggravating losses. In the end suffer losses of Baring Bank $1.3 billion. Baring Bank was forced to go bankrupt because its losses exceed capital

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