Ibis Associates

NEWSLETTER

June, 1999

Volume 1 No. 3

Last month we discussed the standards and goals involved in benchmarking. We covered the three types of benchmarking; Internal, Competitive and Universal and discussed how to choose the best practice for your company. This week we discuss risk management.

RISK MANAGEMENT

Risk management identifies and manages risks and threats inherent to your organization. Traditionally, risk was considered only as part of an insurance issue. Because insurance coverage usually came in standard packages, the idea of managing risk was not taken as a serious concern. However, the question of managing risk has changed dramatically in recent years. What are the risks that can be managed? There are many. They include: Insurable; Liability; Personnel; Property; Financial; Environmental Risks and many others.

Simply speaking, there is a three-step approach to risk management. First, identify the risk. Secondly, determine the potential pitfalls of that risk. Lastly, determine how the risk should be handled. This month we will identify the more common forms of risk in organizations.

INSURABLE RISKS

Many risks are insurable. Often companies insure their property as a matter of course. Insurance may cover both real property and personal property. Other exposures that are insurable are physical perils including natural events as fires, floods, storms and earthquakes. Social perils such as employee theft, vandalism and embezzlement are also insurable.

LIABILTY RISKS

Another risk that often concerns an organization is liability exposure. This may include a wide range of subjects that differ based on the type and practices of business the organization undertakes. Some examples include: bailee and bailor issues; environmental issues; copyright and patent infringement; unfair trade practices; product liability and improper acts by employees such as sexual harassment. Professionals usually require a special kind of liability insurance, such as stockbrokers, doctors and lawyers.

FINANCIAL RISKS

Financial risks usually transactional. They include interest rate risks; foreign exchange risks; maturity risks; credit risks and; market risks. Corporate Treasurers of large organizations often use various methods to control and reduce financial risk. For example, investors commonly diversify their portfolios to include varying portions of stocks, bonds and other instruments with different maturity dates. This simple diversification is quite effective in reducing the risks associated involved in the financial and commodity markets.

Derivatives have recently had a great deal of media attention. Most of that attention has focused negatively on derivatives as investment instruments. However, less is said about the benefits of using a few of these techniques to hedge your financial risks.

OTHER RISKS

Other identifiable risks may include: Input Risk, associated with costs such as raw materials and labor; Demand risk associated with the demand for products or services; Environmental Risk; Fraud Risk and; Legal Risk. Other issues that may involve risk include personnel policies and security. It should be noted that both volunteers and unpaid interns must be considered as part of an effective management of personnel risks.

How Can Ibis Associates Help Your Organization?

Talk to us about a risk management assessment. Let us teach you how to monitor and assess your risks.

NEXT ISSUE -

In our next issue we will continue our discussion of risk management by quantifying and measuring risk. Finally, we will discuss methods to control risks within an organization.

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Smile of the day

The real art of conversation is not only to say the right thing in the right place, but also to leave unsaid the wrong thing at the tempting moment.

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Small Print

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CONTACT INFORMATION

P. O. Box 417 Telephone: (626) 799-0680

So. Pasadena, CA 91031 Facsimile: (626) 799-6939

E-Mail: MLieberman@IbisGroup.com Web site: www.IbisGroup.com