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Risk Financing; Business, Ethics,


For all people interested in business and ethics we suggest to visit the following website:
http://www.cauxinitiativesforbusiness.org/home.htm and to read the business principle settled in the "Caux chart":
The Universal Declaration of Human Rights http://www.un.org/Overview/rights.html
The International Labour Organization's Declaration on Fundamental Principles and Rights at Work
The Rio Declaration on Environment and Development http://www.un.org/esa/sustdev/agenda21.htm

The nine principles are:

  • Human Rights
    • Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights within their sphere of influence;
    • Principle 2: make sure that they are not complicit in human rights abuses.
  • Labour Standards
    • Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;
    • Principle 4: the elimination of all forms of forced and compulsory labour;
    • Principle 5: the effective abolition of child labour;
    • Principle 6: eliminate discrimination in respect of employment and occupation.
  • Environment
    • Principle 7: Businesses should support a precautionary approach to environmental challenges;
    • Principle 8: undertake initiatives to promote greater environmental responsibility;
    • Principle 9: encourage the development and diffusion of environmentally friendly technologies.
  1.1. Risk Financing Solutions

Every organisation is exposed to risk. Some risks can significantly affect your business and some can be accepted as part of your usual business risks.
You need to establish:

  • What those risks are; what is the likelihood of the risk occurring; and what effect the risk will have on your business
  • What alternatives are available to protect your business against the effects of each risk? Is insurance the most cost-effective solution?
  • If insurance is required - how to buy it at the right price
  • How to ensure that your insurance coverage is effective in the event of a claim

Every business needs to consider all these questions at regular intervals. Indeed, an annual review of the risks to which the business is exposed is sound corporate practice, and a requirement of the Australian Stock Exchange. Insurance Brokers and Underwriters offer assistance, but, however professional, their recommendations are naturally biased towards insurance solutions, and tainted by self-interest.

Standards Australia have published an Australian/New Zealand Standard on Risk Management AS/NZS 4360:1995. In providing Risk Management advice to our clients, Risk Financing Solutions operate within this standard.

Few organisations have the resources for a full time Risk Manager. These questions and more can be addressed professionally by employing Risk Financing Solutions on a project or time basis.

We provide services to businesses addressing the following areas:


Exposure Analysis


We visit your premises; study relevant documentation; interview relevant staff; in order to answer the key questions 
What can happen?
What controls are in place?
What is the likelihood of the risk occurring?
What would be the consequences?


Treatment Options


Having considered your exposures, the standard calls for you to consider how best to finance them. The questions we ask include:
Can the risk be accepted? See Risk Financing
Should the risk be avoided completely? 
Can the likelihood and/or consequences be reduced?
Should the risk be transferred? If so, should this be by way of insurance? Is there an alternative?
Once the treatment option, or mix in treatment options, has been decided upon it must be implemented. We assist you to formulate an implementation plan and to activate it.


Programme maintenance and monitoring


All the above information must be collected in writing. We suggest that it be collected and stored using any one of a number of software packages available. Some are general - Microsoft Office ® for example; we have developed a package using MS Access for the purpose which we provide free of charge to our clients. In addition, there are packages specifically designed for Risk Management and we would be happy to demonstrate them to you whilst carrying out a Risk Management review.
The effectiveness of the Risk Management Plan, which results from the above, must be continuously monitored to ensure that changing circumstances do not alter risk priorities.
Factors which effect the likelihood and consequences of an outcome may change, as may the factors which affect the suitability or cost of the chosen treatment option(s).
Risk Financing Solutions offer to carry out this essential task on your behalf at agreed intervals.


Internal Risk Management Systems and Manuals


This activity leads to a formalisation of responsibilities and procedures within the organisation. 
Agreed systems and procedures and instructions to all employees with regard to the handling of risk should be committed to paper in the form of an Internal Risk Management manual. Typically this is in the form of a ring bound manual to enable the frequent updating, which will be required.
Risk Financing Solutions offer to assist you in the development of your systems, procedures and manual. We can also arrange suitable training for relevant personnel.



    Private Finance (Capital Markets), utilization of numerical computer simulations (Monte Carlo for example) for prediction of financial markets http://www.cema.edu.ar

Monetary Risk


Monetary Decisions - Efficient market theory - Financial Market Computer Simulations
Neural networking software for predicting markets  - version of California Scientifics Brain Maker software 
Two successful icons of the financial markets are Peter Lynch and George Soros.
Peter Lynch espouses familiarizing yourself with companies close to home and sticking with them as long as they execute according to plan.
George Soros claims their are points in time where the efficient market theory is strained, and therefore creates opportunity.


Power Politics


Power Politics
Definition: It is a political relation based upon power, where a State's relations and actions are determined by an implied threat of use of political, economic or military power by another State. (http://dictionary.msn.com )


Law enforcement, corrections, private security


Prepare yourself for an exciting career in law enforcement, corrections, or private security. Kaplan College, an accredited distance education institution, offers associate's, and bachelor's degrees in criminal justice.
Request more information. http://zesty.ws:8080/track?m=60034&l=1


Financial Risk Management (Romanian Expertise)


We are living in a world of risks! The increase of the electrical power, the sudden decrease of the national currency and the fluctuation of the interest rates are only some few examples of the risk we are thaking dayly.
Weather we like it or not, weather we are individuals or companies. Can we combat the effects of such events?
If not entirely,at least we can diminish them.
The risk management activity has developed both as a concept and as practice, becoming an industry in the countries with functional financial markets.
Regardless of the activity field, any company has a risk department, a risk policy and the obligation to report its risk coverage operations.


Technological and Risk Analysis

  Link to:  Technological and Risk Analysis

Risk Assessment


Completing a Risk Assessment involves determining the probability of a particular disaster occurring in your office and the effects that disaster may have on the operations of your office or your records. A Risk Assessment also helps you determine which protection method is best for your records. Although this is largely an exercise in probability, since we never know what will happen, it will narrow the scope of protection methods and allow for some early disaster preparedness.

There are 3 basic steps to completing a risk assessment:

  • Identify the risks your office may encounter
  • Determine what level of impact the risk will have
  • Calculate the probability of that risk happening

First you will need to identify the 5-6 most important risks to your particular office.

Second, you will need to determine the level of impact each disaster will have on your office and the ability of your office to continue operations. Use the below Impact Rating Scale to assist you with placing a numerical value to the level of impact. For example if you believe the risk will cause office operations to be interrupted for only 3 hours, then the Impact Rating would be given a 1.

  • 0 = no interruption in operations
  • 1 = interruption up to 8 hours
  • 2 = interruption for 8 - 48 hours
  • 3 = over 48 hours of interruption - relocation of operations necessary

Once you have determined the level of impact you will need to identify the probability of the disaster actually happening. In this area, flooding or earthquakes are very probable and would more than likely receive a rating of high (10 probability points), whereas hurricanes are very unlikely and would receive a probability of low (1 probability point). The below listed Probability Rating Scale should be used to determine the probability.

  • High = 10 points
  • Medium = 5 points
  • Low = 1 point

The last step is to determine the risk factor. This is done by taking the Impact Rating and multiplying it with the Probability Rating.

Impact Rating


Probability Rating


Risk Factor






The resulting sum will be your Risk Factor and can be used when you are determining methods of protection.


Managing Soft Asset Risks


Auditors and managers traditionally focus on the hard assets of the organization, the financial and physical assets that are recorded in the accounts. A new way of looking at the value of the organization encompasses these hard assets as well as new categories of soft assets: the human resources (skills, experience, knowledge) and intangibles (information, reputation, vendor and customer relations).
The total value of the organization is a function of the value of all of its assets.
In a knowledge-based society, much of the value of our organizations is wrapped up in our soft assets. The exclusion of soft assets in risk assessment or risk management is out of the question, but including soft assets in the process makes it very complicated. What is exposed to risk is the replacement value of the asset.

For hard assets, that value is relatively easy to calculate. For soft assets, the risk exposure is much more difficult to measure and manage.

Lessons from Information Systems Financial Risk Management

The principles of financial risk management are reasonably well known. Generally, the direct and indirect financial exposure to risk is calculated and compared to risk management countermeasures.
Various models and tools help value portfolios of complicated financial instruments and the cost/benefit of controls and other risk management techniques.
Financial risk management strategy depends largely on diversification, risk-transfer contracts, and active monitoring. Likewise, hazard risk management uses different tools but tries to achieve the same goals through a similar strategy.
But what about behavioral risk management or reputation risk management?
How are the strategies and tools different from those used for hard assets? There may be some lessons learned earlier when these issues were addressed for information risk management.
In the 1970s when mainframe computers were very expensive and the data they stored was relatively rudimentary, the risk to the computer assets was calculated based on the value of the equipment.
As EDP assets matured into Information System assets, the value of the stored data rose dramatically in relation to the cost of hardware.
Risk managers, computer security specialists and internal auditors began to argue for recognition of risk based on the increased value of the data.









Financial Risk

Hazard Risk

Behavioral Risk

Reputation Tisk

Selling management on the need for assessing the human resources risk or the reputation risk has been assisted by the struggle to convince management about information risk. It was not always easy to get management’s ear about information systems risk.

A common plea that was heard not too long ago was for someone to show the internal auditor "how to sell management on the risk." The answer quite often was a catastrophic event to demonstrate that the risk was real.

Behavioral Risk Management

One of the two new approaches to risk assessment for soft assets is behavioral risk management, or the avoidance of preventable losses in the workplace. Behavioral risk management is about the risks to the human resources of the organization in their daily job interactions.
The premise is that worker productivity is diminished by certain risky behaviors, and that these risky behaviors can be mitigated by management action.
Worker productivity is about producing goods and services – behavioral risk management has a strong element of "bottom-line focus."
Behavioral risk management deals with the following issues:

  • Excessive absenteeism
  • Stress-related disabilities
  • Employee lawsuits
  • Substance abuse and addiction
  • On-the-job injuries
  • Employee theft, fraud and sabotage
  • Racial and gender harassment
  • Workplace violence

Behavioral risk management addresses employee risks associated with acting out behavior that is detrimental to productivity. Such behavior includes acts of retaliation against an employer, manager, union representative, or co-worker; self-medicating and other coping actions; actions arising out of emotional instability; and actions due to a person’s lack of socialization.
Risk management for behavioral issues stresses an accurate assessment and a proactive detection and prevention program. The assessment focuses on the indicators of human stress in the workplace.
Benchmarking, incident reports, keen observation, and employee attitude surveys form the bulk of the assessment tools.
For instance, benchmarking the on-the-job injury rate against others in the industry must be combined with careful analysis of a representative sample of injury cases to determine if unusual patterns exist. Keen observation of both official and unofficial items posted on workplace walls and partitions can indicate areas of dissatisfaction and resentment. Employee surveys are used often only to confirm the results of benchmarking, incidence analysis and observation.
Behavioral risk management examines the safety valves built into the workplace – what are they and how well are they used by employees.
Behavioral risk assessment involves cataloging these types of safety valves and measuring their effective utilization. One common finding is that there are sufficient programs, but management does not advertise their existence, or discourages their use, or both.
Managing behavioral risk means acting on the results of the risk assessment to emphasize prevention of behavioral risk events or early detection and intervention if these events occur.

Other Human Resource Risks

In addition to behavioral risks, there are other organizational risks involving the human resource assets. Each of these risks can affect productivity and organizational effectiveness:

  • Poor internal communications can lead to over-reliance on the informal communication paths (the "grapevine") or distort the governance process by creating nodes of information hoarding and power. Good corporate governance requires effective and efficient information flows throughout the organization.
  • Lack of trust among employees can substitute fear and suspicion for cooperation and collaboration, thereby affect productivity. Management/employee mistrust can lead to work stoppages, lockouts and contentious union relationships in a union environment. Even in a nonunion environment, lack of trust in the leadership can dissipate work efforts as people begin to drift from agreed business plans to follow their own ideas.
  • Poor succession planning and employee development can have long term ill effects on the organization. Bright potential leaders may become discouraged through lack of development opportunities and leave the organization prematurely. The risk is that the organization suffers from lack of fresh ideas and good leadership and loses out to competitors.

In a knowledge-based economy, no organization can afford to ignore the risks to its human assets.

Reputation Risk Management

When the University Internal Auditor was asked what was the most important asset of the university, the internal auditor replied, "Well, the buildings and grounds, of course."
This reply is the kind expected from those of the old school, where hard assets are the most important. Modern thinking about risk would suggest that the university’s most important asset is its reputation. Without a good reputation, staff will be hard to attract, endowments will be difficult to obtain, and the government might be reluctant to fund the operation.
Without a good reputation for offering a safe and learning environment, parents would be reluctant to send their children. In so many organizations, especially the public sector, reputation is everything.
Once the trust between organization and citizen is lost, operations become very difficult.
Many internal auditors take an implicit path to reputation risk. Internal audit risk models often have some expression of political risk, public confidence, or adverse publicity as one of the risk factors in their organization’s risk management model.
This is a good beginning, but to ensure that reputation is recognized as a valuable and irreplaceable soft asset would be an improvement.


The key to successful internal auditing or risk management is a thorough risk assessment. Including soft assets as a specific step in your thinking process will make you a better auditor and a better risk manager.
Managing the risk to soft assets is a natural and necessary extension of managing the risk to traditional hard assets.
There are new approaches to managing soft asset risk, such as behavioral risk management, that you will need to master, but the emphasis must be to think about risk as broadly as possible over all types of assets in all of your assessments.


Risk Assessment and Risk Management


@2006 IPA CIFATT Craiova. All rights reserved.