Risk management in Etablissement Kazoza et Compagnie-Rwanda

CHAPTER ONE: BACKGROUND TO THE STUDY

1.0 Introduction

This chapter contains the background of the study, statement of the problem, the purpose of the study, general and specific objectives, research questions, significance of the study, definitions of terms as well as the conceptual framework. It covers the overview of risk management in general, highlights the motivation of the researcher to carry out this study and states the importance of the study towards the readers as well as to the research setting.

1.1 Background to the study

Risk is usually defined as an assessment of the possibility of some adverse event occurring and the likely consequences of this event. Risk is inherent in the functions and activities of any organisation and its service providers.

Risks can come from uncertainty in all areas such as in accidents, natural causes, business and project failures, attack from adversaries etc (Hillson D.1997). Any business has exposure to a diverse range of risks. This exposure includes professional risks, commercial risks, political risks, risks to beneficiaries, community services and risks associated with competition. The organisation's main risk mitigation strategies to date have included administrative, contractual, technical, safety and management controls as a part of business and program activities (www.treasury.act.gov.au).

As the consequences of an adverse event may include an inability to meet beneficiary and customer requirements, financial loss, organisational or political embarrassment, operational disruption, legal problems, and so forth, it is important that management policies, procedures and practices are in place to minimise the organisation's exposure to risk. Risk management involves adopting and applying a systematic process to identify, analyse, assess, control and monitor risk so that it is reduced and maintained within an acceptable level. Risk management is a business tool and a part of «good management» and good planning processes. (Hillson D.1997)

Risk management is a key part of improving a business and services to be a leading business. The aim is to achieve best practice in controlling all the risks to which business is exposed. To achieve this aim, risk management standards should be created, maintained and continually improved. This will involve risk identification and risk evaluation linked to practical and cost-effective risk control measures. ( www.standards.com.au)

Risk management is a continuous process demanding awareness and proactive action from all the organisation's employees and outsourced service providers to reduce the possibility and impact of accidents and losses, whether caused by the organisation or externally. Risk management is a core responsibility for all managers. Suitable risk management activities should be incorporated into the business planning, operations and the management. ( www.insuranceriskadvice.act.gov.au).

Risk management is one way of business planning and implementation process, but, the fact of having a Risk Management Plan (RMP) is not enough, it must be operational and all company's employees must be aware of it and get trainings on how it is implemented. These trainings are mandatory because these ones must know how to prevent some risks and how they behave in front of a materialized risk (issue) because they may be themselves either, source of risk or be at risk if not well protected (www.treasury.act.gov.au). Importantly, the research will assess the level of risk management in private institutions.

Risks are everywhere in this world, it is almost impossible for all of them to be prevented or controlled before they appear. Some risks are harder to identify and prevent their occurrences (e.g. risks of a natural disaster like Tsunami, draught, floods etc). But, some of them are manageable and preventable but do occur and cause serious negative consequences in life simply because of ignorance, negligence or lack of planning ( http://www.mindtools.com). Etablissement Kazoza et Compagnie (EKJ&CIE) is a fourteen year old company working in Rwanda involved in house and road building, electrical ware repair.  With time and of the ambitious plans by owners, its capacity was increased time to time. However, EKJ&CIE like any other business company faces a high market competition of similar and older companies registered in the Rwanda Development Board (RDB). Among others, it faces risks like high competition, theft, environmental pollution, physical injuries to the personnel, fire, IT fraud, insecurity among others which may cause negative consequences such as financial loss, injuries, deaths of employees etc ( www.morebusiness.com) despite good financial investments. The success on the open market requires many factors among which the risk management plays a big role.