Risk management is a systematic method to identify, analyze and monitoring the risk involved in any activities and process. It also a central part of any organization’s strategic management. It is the process whereby organizations methodically address the risks attaching to their activities with the goal of achieving sustained benefit within each activity and across the portfolio of all activities. Risk management is the identification, assessment, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives, whether positive or negative) followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities. Risks can come from uncertainty in financial markets, project failures (at any phase in design, development, production, or sustainment life-cycles), legal liabilities, credit risk, accidents, natural causes and disasters as well as deliberate attack from an adversary, or events of uncertain or unpredictable root-cause.
2. THE IMPORTANCE OF RISK MANAGEMENT
Risk management report is very important to the investor for their decision making. Investor’s need to decide either the company is potential to make profit or not from their risk management report.
2)Achieve objectives of the firm
Risk management is very important for company to achieve their objectives. It is because they must know all the risk and trying to avoid the risk for achieve the company objectives.
3)Reduce cost and financial implications
The effective risk management can help companies to reduce their cost and effect of the financial implications. For the example, from the risk management, Sime Darby can avoid the loss of 2 billion.
4)Effective use of existing skills and experience
The good risk management process will make companies utilizes their existing skills and experience.
5) Focus on priorities who deals with higher risk
Risk management will help company to identify their priorities in risk management. The wrong focus in risk management will make loss in the company.
3. Identification and Analysis of Sime Darby’s Risk Management
Our group will focus on 3 elements which are the policy, reporting risk structure and audit meeting. We chose MMC Corporation Bhd (MMC) to do comparisons of risk management with Sime Darby because; this company is a premier utilities and infrastructure group with interests in Transport and Logistics, Energy and Utilities and Engineering Construction. Since, the issue of Sime Darby is about Energy & Utilities; therefore MMC Corporations Bhd owns strategic assets in Malakoff (Malaysia’s largest independent power producer).
1. Risk Policy
As we can see in the table below, Sime Darby just want to create culture in their organization the importance of Risk Management. But, for MMC they tend to create thorough risk management strategy to prevent from undesirable outcome.
|SIME DARBY |MMC | |Creating a risk-aware culture and for building the necessary |To adopt a common risk management framework this creates a | |knowledge for risk management. They also have the |consistent consideration for risk and reward in a day-to-day| |responsibility to make sure all operations compliance with |planning, execution and monitoring of the strategy and | |applicable laws and regulations. |achievement of corporate goals. |
2. Reporting Risk Structure
Reporting Risk Structure of Sime Darby is quite simple as compared with MMC’s Reporting Risk Structure. While MMC provide thorough reporting risk...