RISK MANAGEMENT REDUCES LOSSES
IREFER to the report, “64 dead in Russian shopping mall inferno” (NST, March 26), in which loss of lives was attributed to negligence. The fire swept through the upper floors of the Kemerovo shopping centre, which included a cinema complex and children’s play area, on a Sunday afternoon.
Investigators said fire exits had been blocked, the public address system had not been switched on, the fire alarm system was not functioning and children had been locked inside cinemas.
Sadly, the staff responsible for public safety were the first ones to flee when the fire broke out, according to investigators.
The incident, classified as criminal negligence, will lead to a sad ending. Staff found guilty of negligence, or worse, will be harshly punished.
In most instances, the culprit is a risk management programme that is deficient or perhaps the mall had one but kept it under lock and key.
Come to think of it, this incident could happen to anyone. Organisations spend a lot of time designing risk management programmes, but fail to communicate them to their employees.
A risk management programme is an organised method to deal with risks.
Since we face the possibility of loss, it is wise to devise a way to deal with it.
The programme starts with identifying potential loss exposures and measuring them in terms of frequency and severity.
The next step is to examine and select the most suitable method to handle the loss exposures.
Once the risk management tool is selected, the risk management programme should be implemented and systematically communicated to employees.
The risk management programme must be monitored and controlled systematically too. It must be reviewed to ensure that the techniques employed are suitable and cater to the current conditions.
The risk management process does not take place in a vacuum.
Things change; new risks arise and old ones disappear.
The techniques that were appropriate last year may not be suitable this year, therefore constant attention is required.
An effective risk management programme can help organisations reduce risks.
Thus, the severity of the financial impact of the probable loss can be reduced.
Mistakes occur. Evaluation and review of the risk management programme permits the manager to review decisions and discover mistakes before they become costly.
Let’s manage risks and not losses.