Risk Management in Industry - an Overview

Topics: Risk management, Insurance, Risk Pages: 10 (3203 words) Published: February 26, 2013

Risk Management in Industry – An overview
apid industrialisation has brought in its wake several problems. One of them is ‘industrial risk’, which is taking newer and newer forms ever. With mechanical, electrical, chemical and radiation hazards besetting the industrial world, the ‘Risks to Life, Limb, Health and Wealth’ are common in this sphere of economic activity. Risks are present in every corner and under every stone. Industrial risks may arise while handling, storage or because of S. Ranga Swamy

The author is a Member of Institute


services. The Supreme Court judgement in the Delhi gas leak case and the Bhopal disaster case have added a new dimension to the issue of industrial risk. While the workers are worried about their life, managements are concerned over the financial liabilities likely to be imposed by an accident. The Supreme Court has held in the Shriram fertilisers industries case that if an enterprise is engaged in a hazardous or inherently dan-

The Bhopal Gas disaster in 1984 had added an altogether new dimension to the problem of industrial risk in India. Since then, the industrial workers have become more vigilant about their safety while the managements dread the financial liabilities likely to be imposed by an accident. The Corporate Sector in India is increasingly realising the importance of putting its ‘industrial risk plans’ in writing and employing a ‘risk manager’ to handle their risks. The article offers a peep into the concept. operational errors and violation of accepted safety procedures. The industry, therefore, has to be always prepared for such eventualities. An industrial risk is the one that may affect several areas within the factory or may cause serious injuries, loss of life, extensive damage to property and disruption to manufacturing activities. Such risks may occur in any industry in spite of best efforts to prevent them. The suffering and damage as a result of the accident is determined by the potential for loss surrounding the event. However, the risk can be largely avoided if effective action is taken as per pre-planned and practised procedures, utilising the combined resources of the factory and outside emergency gerous activity that results in any escape of toxic gas, the enterprise is “strictly and absolutely liable” to compensate all those who are affected by the gas leak. Objective of Risk Management The main objective of risk management is to protect the property, earnings and personnel of the organisation against losses and legal liabilities that may be incurred due to various risks. It minimises cost of the risk and maximises the profitability. The accidental risks may not only result in unexpected costs to a company but threaten its survival altogether. Thus, it is essential for the management to do some exercise to know about

the possibility of a ‘risk event’, sources of such event and impact of such event beforehand and consider ways and means of preventing, reducing or minimising the loss. A risk manager has to take necessary measures with least possible costs to bring the functioning of the organisation back to normal when the risk event takes place. Now, the corporate sector in India is increasingly recognising the importance of employing independent risk managers to manage their risks. In the changed scenario the main function of the risk management is that it should control not only the pure risks but also extend services to the analysis and control of all types of risks arising out of Business. Concept of risk Risk may be defined as uncertainty of loss. A risk has been defined in the concise oxford dictionary as “hazard, chances of bad consequences, loss, etc. exposure to mischance”. A risk in the commercial terminology is an unwanted and uncertain event. An operational definition of risk is that it connotes uncertainty concerning financial loss and uncertainty concerning the outcome of fortuitous events. In respect of some uncertain events, it...
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