Topic 1 : Uncertainty and Risk Topic 2 : Risk Universe

Saturday, September 10th 2011 Saturday, September 17th, 2011

Coordinator Antonius Alijoyo Lecturer Team Joyce Andries, Stefiny Norimarna, Ridwan Hendra

Risk Management
Department of Management Faculty of Economics Universitas Katolik Parahyangan Bandung 2011

Learning Objectives
Topic 1 : Uncertainty and Risk

What is uncertainty? What is risk? How do we define risk? How do we deal with uncertainty and risk?
Topic 2 : Risk Universe

Category of Risk Risk Components Scope of Risk

JOY 2

Learning Objectives
Topic 1 : Uncertainty and Risk

What is uncertainty? What is risk? How do we define risk? How do we deal with uncertainty and risk?
Topic 2 : Risk Universe

Category of Risk Risk Components Scope of Risk

JOY 3

Group Discussion 1
What is Uncertainty ?

What is Risk ?

JOY

Uncertainty is

Condition where we are not sure about what will happen

because of lack of knowledge about the future risk is recognized

JOY 5

Uncertainty and Risk

Current condition

slide by Antonius Alijoyo

JOY 6

Relation between Uncertainty and Risk

Current condition

slide by Antonius Alijoyo

Uncertainty and Risk

Current condition

Objective

slide by Antonius Alijoyo

Uncertainty and Risk

Current Condition

RISK

Objective

slide by Antonius Alijoyo

Risk is
A condition in which there is a possibility of an adverse deviation from a desired outcome that is expected or hoped for
or

a situation, event, or happening that can lead to the non-achievement of objectives

JOY

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Uncertainty and Risk: classic phenomenon

High Risk High Return

Questions :

1. Which point should be taken? 2. How to compare between two investment alternatives? 3. Is it possible to get high return with lower risk?

Return

Risk
slide by Antonius Alijoyo
JOY 11

Uncertainty and Risk: current phenomenon

High Risk High Return

Zone 1

Zone 2

Zone 3
Excessive Risk Taking

Insufficient Risk Optimal Risk Taking Taking

Risk-Adjusted Return

Return

Risk Risk and absolute return

Risk Risk and relative return

slide by Antonius Alijoyo

JOY

12

Learning Objectives
Topic 1 : Uncertainty and Risk

What is uncertainty? What is risk? How do we define risk? How do we deal with uncertainty and risk?
Topic 2 : Risk Universe

Category of Risk Risk Components Scope of Risk

JOY 13

Category of Risk
Based on Basic Characteristics Based on Impacts

Pure Risk

Down-side Risk Up-side Risk

14

Speculative Risk
JOY

Category of Risk
Loss is only possible outcome, can be quantified physically The event beyond risk takers control

Pure Risk

JOY

15

Category of Risk
Loss is only possible outcome, can be quantified physically The event beyond risk takers control

Pure Risk Speculative Risk

JOY

Gain or loss can be possible as an outcome The event under risk takers control

16

Category of Risk
Down-Side Risk
Refers to bad things happen The bad things could reduce/destroy shareholder value or fail to the objectives Directly affected

JOY

17

Category of Risk
Refers to bad things happen The bad things could reduce/destroy shareholder value or fail to the objectives Directly affected Refers to good things not happen The good things could add shareholder value objectives or help to achieve the objectives Indirectly affected
18

Down-Side Risk Up-Side Risk

JOY

Group Discussion 2

Define your own risk as student

JOY

19

What is Risk Components?

Controlled Risk

Inherent Risk

Activities
Residual Risk

JOY

20

Relation of Risk Components

Existing Risk Control
Objective of Risk Management

Controlled Risk

Controlled Risk

Additional Risk Control Inherent Risk

Activities

Residual Risk

JOY

Residual Risk

Activities
21

Inherent Risk

Scope of Risk

the industry itself

JOY

22

Scope of Risk

the industry itself

scope of business

JOY

23

Scope of Risk

the industry itself scope of business

scale of business
JOY 24

Examples of Risk
Market Risk Credit Risk Operational Risk Strategic Risk Reputational Risk
Basel II Accord Market Risk Credit Risk Operational Risk Strategic Risk Reputational Risk Financial Risk Technical Risk et cetera

JOY

25

Home Assignment 2 :
Submission date Hard copy Saturday / September 17th 2011
GROUP 1. Define your own risk as a student (around 5 risks). 2. Describe the definitions of risk that listed in page 25 (in this slide) 3. Find 5 types of risk and its definition that different with risks in page 25 (in this slide) (each group should not have same type of risk) 4. Find 3 definitions of Risk Management and its definition (each group should not have same type of risk)

JOY

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Term of Reference (TOR) of Home Assignment :

Type your assignment using : type of fonts : any , size : 11 paragraph : 1.5 paper : A4 In the cover of your assignment, write down : Individual assignment : name of the assignment, name, class, npm Group assignment : name of the assignment, name of group, class, name and npm of each member of group Every group assignment should be ready to be presented in front of the class, so it means prepare your presentation deck.

JOY

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