Risk Management

Rini Novrianti Sutardjo Tui

What is Business Risk?

Business Risk
The threat that will adversely
affect organizations ability to
achieve its business objectives

Possibility
that
opportunities
will not be realized.

Possibility
that threats
will be materialized or
error will be made.

What is A Risky Company?

1
Failing to manage
risk, regardless of
the degree of risk
exposure.

2
Ignoring
substantial
threats.

3
Believing that the
pursuit of low risk
exposure is the
same as managing
risk.

Types of Risks
Type of Risk

Speculative Risk (Gain/Loss)

Market

Business

Pure risk (Loss only)

Liquidity

Performance

Hazard

Categories of
Risks

Securities
Physical
commodities
Currencies

Strategies
Organization
Staffing
Technology
Image &
marketing

Markets
Companies

Counterparty
Insuree
(liability)

Property &
casualty
Life and
health

Principal
Causes

Supply and
demand
changes
(basis)
Expected
market
conditions
(time)

Management
judgment
Limited
information
Competitor
action
Changes in
customer
needs

Capacity
(volume)
constraints
System
failure
Unequal
information

Employee
error/theft
Management
actions
Business
failure

Employee
illness
Acts of nature
Accidents

Economic policies, regulations, and other sovereign acts

Force majeure considerations

Risks in Mining Industry

Geological Risks

Engineering Risks

Economic Risks

Political Risks

Exploration risk
Scarcity risk

Technological risk

Price fluctuation
Monetary risks
Competition risk

Change in governing regime

Change in mining policy

Elements of Risk Management

Understand range and
magnitude of risks

Know what you

dont know

Communicate
issues clearly

Risk Management Paradigm

Risk
Management
Risk
Measurement
Risk
Identification

Risk
Reporting

Classic Risk Map

Mapping The Risks

Critical
60+
High
30 59
Medium
16 29
Low
1 15

Risk Mapping Tool

Catastrophic

VH

VH

VH

VH

VH

Moderate

VH

Minor

VL

Insignificant

VL

Impact

Major

VL

VL

Very High
Urgent action to be taken that will
reduce the level of risk to tolerable
or less.
High
Detailed action plans required
that will reduce the level of risk to
tolerable or less.
Tolerable
Managed by keeping under
review and through continued
good practice.
Low
Manage through continued good
practice.
Very Low
No action required.

Probability

Impact VS Probability
High
I
M
P
A
C
T

Medium Risk

Share

Mitigate & Control

Low Risk

Accept

Low

High Risk

Medium Risk

Control

PROBABILITY

High

Treat Risks

Risk Impact to Company Tolerance

Choices

Far
Exceeds

Avoid

Transfer
Reduce
Accept

High

Exceeds

Consistent

Management Believes
It Can Effectively
Manage

Not
Manage

Risk to Company
Strategy
Core

Not Core

Risk Management Process