risk management essay pdf

risk management essay pdf

Effective Risk Management Strategies in Modern Organizations

1. Introduction to Risk Management

Organizations in the business market face both benefits and downsides capable of affecting their performance. Within the downsides, risk is listed as one of the factors that sometimes causes significant problems. Over the years, many organizations were forced to stop the expansion process because they did not have appropriate strategies to deal with various forms of risks. Still, nowadays there are companies which are slowly stopping to expand as they once did due to the fact that the risk to lose an important business is greater than the profit that it would provide. The generalizations of this research are limited to the specific sample size and the data collection methodology. Despite these limitations, the results of this study can contribute to raising questions and providing different views on this matter, as well as stimulating new research.

In many organizations, risk management is perceived as a procedure that can slow down the development process. However, in this study, the importance of risk management has been emphasized and its impact on the performance of modern organizations has been emphasized. The methodology used in this study includes an extensive literature review and an empirical analysis based on a research project. The objectives of this research are to understand which risk management strategies should be implemented to improve companies’ performance and to evaluate the adoption level in this context. Despite the relevance of risk management, research within this particular area is still an understudied subject.

2. Key Concepts and Theories in Risk Management

Uncertainty in various forms is always part of organizational life. Raylene and Carole have taken this view by asserting that risk is “the effect of uncertainty on objectives.” Dan does agree with this on the basis that they usually come in different versions of possibly occurring, possibly not occurring, and what occurs being a surprise. Types of risk covered are strategic objectives, operational objectives, reporting objectives, as well as compliance objectives. It is clear that a failure to capture the larger picture perspective of risk is more likely to result in fragmentation of the organization’s response. Such fragmentation has a tendency to engender an unsystematic approach to risk management in the organization.

Raylene and Carole defined risk as “the effect of uncertainty on objectives.” They see that risk management aims to ensure that the impact of uncertainties on an organization’s activities is known and well managed. Green et al. states that risk is always involved in every organizational plan, and it can be said that risk management is crucial in any organizational plan. Atkin and Brooks define risk as “a situation involving exposure to possible loss.” They describe risk management as “an integrated practice of business risk exposure identification and monitoring within the organization.” Although risk in general is more often discussed in context with insurance and financial matters, risk is involved in every situation where we are doing something, and security is about keeping up the level of welfare for the future. In a way, managing service quality and information security are the results of risk management – we take care of these two because they are the effects of mechanisms put in place to manage risk.

3. Types of Risks Faced by Organizations

There are several different types of risks that faced by business organizations, some of the most important are: Property Risk which includes damage from fire, earthquake or cyclone. Liability Risk includes recoveries of medical expenses, injuries and damages. Human Resources Risk includes turnover, retention and labor relations. Strategic Risk includes regulatory risk, political risk. Market Risk includes inventory overstock or stockouts, production level, price. Credit Risk includes monitoring of third party performance, price risk. Financial Risk includes default and interest rate risk such as borrowing risk, lending risk. Prior to the computerization of risk management, data of the required quality and dependability necessary were often difficult to get. Nowadays, data are available and can be classified into three categories. Internal, which includes loss and expenses connected with the organization’s own business. External…, Industry-wide loss data and Technical data such as construction costs and specification data. Digitized external data is now available on the internet. Official data, paid research and “free” sites run by insurance information services and trade association’s websites have gradually increased access to reasonably reliable facts and reports and with that, understanding.

From the most recently collected statistics, several thousands of business enterprises have gone into liquidation every year from approximately one million on the US Master Business List. In addition, there must be at least four times as many individual bankruptcy proceedings in any one year. Unfortunately, many of those businesses suffer from poor or non-existent risk management strategies which do not coordinate risk financing and risk control at a level sufficiently comprehensive to enable the enterprise to protect itself from substantial loss. Moreover, this is a costly failure, as poor risk management can increase costs and reduce the value of the enterprise, leading ultimately to a major loss of shareholder value. Therefore, there is a strong case for better risk management in companies and greater awareness of the role of risk managers in promoting and protecting value. It is the duty of a risk manager to identify, assess and understand the losses faced by, or likely to be faced by his or her organization.

4. Best Practices and Strategies for Effective Risk Management

Risk management should ensure that all elements of system performance are examined, including compliance, environmental, health and safety, security, and business. It is not just about identifying and managing undesirable or adverse consequences; it is also important to recognize that some uncertainty can lead to both adverse and beneficial opportunities and, thus, should be managed proactively to improve the likelihood of the success of these opportunities. This review balances international standards and addresses a wide range of significant and contemporary issues to enhance the assurance that governance and organizational leadership are proactively managing risk within an enterprise risk management framework. These cases collectively identify and illustrate critical success factors, as well as emerging best practices. Based on the identified case study risk management best practices and lessons learned, a general process framework was derived.

As all organizations move inexorably towards a more knowledge-based economy, and as uncertainty is a major characteristic of our rapidly evolving world, the need to manage risk (in the context of organizations’ objectives) becomes self-evident. This review used case studies to demonstrate that effective risk management is possible, despite the inherent challenges common to most organizations. It illustrates how visionary and thoughtful leaders can use best practices and specific lessons learned to design and implement an infrastructure, and thereby reduce the adverse effects that often accompany uncertainty. The value of risk management lies in the capability to make more informed decisions.

5. Case Studies and Real-World Applications

Effective Risk Management Strategies in Modern Organizations is a pivotal reference source for the latest scholarly material on the identification and assessment of potential business risks and the creation of strategies to minimize the impact of the negative outcomes of such risks on business operations. Any organization that is thinking about its future must think about effective risk management and consider five key things: approach or view, levels, key people, risk strategies, tools, and techniques. It is based on the observation that many “risk-resistant” organizations are characterized by authoritarian structures and managerialism, and that there is a high degree of risk acceptance, risk diffusion, and risk transfer. This is why the company is a perfect example of how the implementation of what is a state of the organization can be transformed into an effective and efficient leitmotif.

Today’s organizations face many challenges brought about by globalization, technological shift, and changing cultures. Risk management planning seeks to maintain business productivity and contribute to qualitative and stable growth. In doing this, firms can come up against barriers to implementing effective risk management. It’s important to recognize the critical role of leadership and management. This academic reference book presents an expert analysis of risk management practice in modern organizations. The impact of the risk that will be prepared is the complexity of the strategies that modern organizations may adopt. Indeed, moral satisfaction is more important than money.