Risk Management

11 Key excerpts on "Risk Management"

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  Raising Entrepreneurial Capital

  • John B. Vinturella, Suzanne M. Erickson(Authors)
  • 2003(Publication Date)
  • Academic Press

    (Publisher)

  That is a prime motivation of entrepreneurs. Current thought divides busi-ness risk into three categories: financial risk, operational risk, and strategic risk. Each of those will be discussed later in this chapter. Risk Management is the identification, analysis, and treatment of exposures to loss . Those exposures may involve either pure risk or speculative risk. Risk Management has been described as an art, a science, and as ‘‘structured common sense.’’ In some respects, all of those are true about risk manage-ment. Risk Management is both active and reactive. Pre-loss planning is a core strategy for business continuity, but remediation and recovery are also important. (The events of September 11, 2001 provided many lessons about these notions.) Procedures must be put in place to minimize the occurrence of loss and to minimize the financial impact of the losses that do occur. Risk Management is a core value in firms. Over 800 of the Fortune 1000 firms are members of the Risk and Insurance Management Society, Inc. 332 Essentials of Risk Management (RIMS). RIMS is the leading Risk Management organization in the United States. Risk Management contributes to the continued existence of economic entities, both for-profit and not-for-profit, by allowing those entities to maintain their productive resources, to meet their business objectives, and to provide their critical services. Peter Drucker, the renowned management scholar, notes that the practice of Risk Management is a hallmark of a developed economy. RELATIONSHIP OF Risk Management TO FINANCIAL MANAGEMENT Financial theory holds that the value today of the future earnings of an economic enterprise will be maximized if periodic fluctuations in those earnings are minimized. One of the purposes of Risk Management is to eliminate, or to minimize, those periodic fluctuations in earnings.

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  Business Management in an Uncertain World: An Introductory Text for Executives

  • Jonah C. Pardillo(Author)
  • 2020(Publication Date)
  • Society Publishing

    (Publisher)

  Business Management in an Uncertain World: An Introductory Text for Executives 202 Threats related to the security of the information technology (IT) and risks related to the data, and the Risk Management strategies in order to increase them, have become a top priority for the digitized organizations. As an outcome, a Risk Management plan is more and more consisting of the process of the organizations in order to determine and regulate the dangers or risks to its digital assets, which is consisting of proprietary corporate data, a consumer’s personally identifiable information (PII) and the intellectual property. Each and every business and organization address the risk of unpredicted, dangerous events that can cost an organization or a firm lot of money or cause it to permanently close. Risk Management permits a company or a firm to try to prepare for the unanticipated with the help of minimizing the risks and extra costs before they take place (Figure 8.2). Figure 8.2. The basic significance of the Risk Management . Source: Image by pxhere. In the context of the world of finance, Risk Management refers to the practice of the finding out the potential risks in advance, evaluating them, and taking precautionary steps in order to decrease the chances of the risks. The time, when an individual or a person makes an investment decision, it discloses itself to a several numbers of financial risks. The quantum of Risk Management in Uncertain World 203 these types of risks relies on the kind of the financial instrument. These financial risks might be in the form of the high inflation, volatility in the capital markets, recession, bankruptcy, and so on. In this way, in order to reduce or regulate the exposure of the investment to these types of the risks, the fund managers along with the investors practice Risk Management .

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  The ASQ Certified Quality Engineer Handbook

  • Scott A. Laman(Author)
  • 2022(Publication Date)
  • ASQ Quality Press

    (Publisher)

  Here, usually the focus is on risk reduction and risk avoidance. However, it is important to understand that there are various other lev- els within the organization where decisions relating to risks are potentially taken, even if they are not documented or identified as such. More importantly, these decisions will affect Risk Management at other levels. Quality management emphasizes creating products and services with desirable characteristics that satisfy the customers need and, where possible, delight the cus- tomer. Quality Risk Management is focused on the evaluation of potential events that may impact the objective of achieving quality (in whichever way the word “quality” is defined by the organization). ISO 31000:2018 lists several Risk Management ele- ments of a well-functioning system. It states that Risk Management should be: a. Integrated. Risk Management is an integral part of all organizational activities. b. Structured and comprehensive. A structured and comprehensive approach to Risk Management contributes to consistent and comparable results. c. Customized. The Risk Management framework and process are customized and proportionate to the organization’s external and internal context related to its objectives. d. Inclusive. Appropriate and timely involvement of stakeholders enables their knowledge, views and perceptions to be considered. This results in improved awareness and informed Risk Management. e. Dynamic. Risks can emerge, change, or disappear as an organization’s external and internal context changes. Risk Management anticipates, detects, acknowledges, and responds to those changes and events in an appropriate and timely manner. f. Best available information. The inputs to Risk Management are based on historical and current information, as well as on future expectations. Risk Management explicitly takes into account any limitations and uncertainties associated with such information and expectations.

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  Project Management Concepts, Methods, and Techniques

  • Claude H. Maley(Author)
  • 2012(Publication Date)
  • Auerbach Publications

    (Publisher)

  203 5 Risk Management 5.1 CHAPTER OVERVIEW This unit covers the project Risk Management process from the identifica-tion of risks to establishing the appropriate risk plans that address these risks and the subsequent monitoring and control. Central to this chapter is the Risk Management process, which guides the reader through the steps of identification, assessment, ranking, planning, and control. 5.2 Risk Management—SYNOPSIS 5.2.1 The Risk Management Environment Project Risk Management addresses the uncertain events or conditions that, if they occur, have negative or positive effects on the project objectives. A risk event may have one or more causes and one or more effects. Primarily the effects would be on the major vectors of the triple constraint: scope, cost, and schedule. The effects also extend to cover corporate image and reputation, safety and environmental issues, and the future operabil-ity of the project’s product(s). Risk Management seeks to protect the project, in fulfilling its objectives in an environment outside its control, by developing proactive and reac-tive action plans (see Figure 5.1). Risk Management encompasses identifying, analyzing, responding to, and controlling project risks. It aims to minimize the consequences of negative and adverse events and maximize the results of positive events. 204 • Project Management Concepts, Methods, and Techniques The process of determining an acceptable level of negative risk during the pursuit of a project, and managing these during project implementation, is necessary to successfully accomplish project objectives. Risk Management must be pursued as an integral part of the project management process. Risks are managed in a concerted effort by the proj-ect manager and the project core team members.

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  Management of Information Security

  • Michael Whitman, Herbert Mattord(Authors)
  • 2018(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  Risk Management (RM) The entire program of planning for and managing risk to information assets in the organization. RM framework The overall structure of the strategic planning and design for the entirety of the organization’s RM efforts. RM process The identification, analysis, evaluation, and treatment of risk to information assets, as specified in the RM framework. Copyright 2016 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. CHAPTER 6 Risk Management: Assessing Risk 306 Risk exists in every environment. From an organization’s perspective, the evaluation and reaction to this risk, including financial risk, competitive risk, and economic risk, is commonly referred to as enterprise Risk Management (ERM) . For the purposes of this discussion, the risk to information assets is of the most concern to the information security (InfoSec) function and its personnel. The aspect directly related to InfoSec is commonly referred to as IT Risk Management, or IT security Risk Management. This discussion uses the term InfoSec Risk Management or simply risk management (RM) . Risk Management is the process of discovering and assessing the risks to an organization’s operations and determining how those risks can be controlled or mitigated. This process involves discovering and understanding answers to some key questions with regard to the risk associated with an organization’s information assets: 1. Where and what is the risk (risk identification)? 2. How severe is the current level of risk (risk analysis)? 3. Is the current level of risk acceptable (risk evaluation)? 4. What do I need to do to bring the risk to an acceptable level (risk treatment)? The first three of these questions are examined in this chapter, and the last one, risk treatment, is examined in Chapter 7. The term risk assessment is commonly used to describe the entire set of activities associated with the first three questions.

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  Quality in the Era of Industry 4.0

  Integrating Tradition and Innovation in the Age of Data and AI

  • Kai Yang(Author)
  • 2023(Publication Date)
  • Wiley

    (Publisher)

  Despite these challenges, ORM is a crucial aspect of Risk Management, particularly for organizations with complex operations or operating in high‐risk industries. It helps organizations to manage the risks that are inherent in their operations and to enhance their operational performance and resilience.

  7.3.2.3 Strategic Risk Management (SRM)

  SRM is a business discipline that focuses on identifying, assessing, and managing the risks that could affect the achievement of an organization's strategic objectives [29 , 30 ]. This could include risks associated with changes in the competitive environment, strategic initiatives, mergers and acquisitions, or changes in customer preferences. SRM provides a structured framework for dealing with the uncertainties that could hinder an organization's ability to execute its strategy.

  Strategic risks can arise from numerous sources such as changes in the business environment, disruptive technology, competitive forces, or from within the organization itself. They can also result from decisions concerning an organization's strategic initiatives such as mergers, acquisitions, partnerships, and entering new markets.

  Key Steps in the SRM Process

  1. Strategic Planning and Risk Identification: This involves understanding the organization's strategic objectives, identifying the potential risks that could affect these objectives, and understanding how these risks might impact the overall strategy.
  2. Risk Assessment: After risks are identified, they are assessed based on their potential impact on the strategic objectives and the likelihood of their occurrence. This helps to prioritize the risks.
  3. Risk Mitigation and Strategy Adjustment:

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  Quality in the Era of Industry 4.0

  Integrating Tradition and Innovation in the Age of Data and AI

  • Kai Yang(Author)
  • 2023(Publication Date)
  • Wiley

    (Publisher)

  3) Demand for Better Corporate Governance: High-profile corporate failures have highlighted the importance of Risk Management as a part of good corporate governance. 4) Strategic Focus: There is a growing recognition that Risk Management needs to be aligned with an organization’s strategy and objectives, rather than being treated as a separate function. Here are several popular contemporary Risk Management models: 7.3.2.1 Enterprise Risk Management (ERM) ERM [25, 26] is a strategic business discipline that supports the achievement of an organization’s objectives by addressing the full spectrum of its risks and managing the combined impact of those risks as an interrelated risk portfolio. As a holistic approach to Risk Management, ERM involves assessing and addressing risks from all sources within an enterprise, both internal and external, to ensure that the organization’s strategic goals are met. The key components of an ERM process, often following guidelines of established frameworks like COSO ERM or ISO 31000, usually include: 1) Risk Management Culture and Governance: This involves establishing a risk-aware culture within the organization, where everyone understands the importance of managing risk. The organization’s leadership plays a crucial role in establishing and enforcing this culture. This also involves defining the organization’s risk appetite and risk tolerance levels. 2) Risk Identification: This involves identifying potential risks that could impact the organiza- tion’s ability to achieve its strategic objectives. It could involve methods like brainstorming ses- sions, interviews, document reviews, or utilizing technology to detect potential risks. 7 Risk Management in the 21st Century 252 3) Risk Assessment: After identifying risks, they are assessed in terms of their potential impact and likelihood of occurrence. The assessment can be both qualitative (e.g., high, medium, and low) or quantitative (e.g., potential financial loss).

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  Enterprise Risk Management

  From Incentives to Controls

  • James Lam(Author)
  • 2014(Publication Date)
  • Wiley

    (Publisher)

  He might even pay someone more skilled to carry out a risky activity—electrical rewiring, for example—on his behalf. Similarly, a company might recognize a potential risk but be content to do nothing about it; establish and enforce risk policies and limits; change strategic direction; make a tactical alteration to one of its business units; or transfer a specific risk through insurance or hedging. Ultimately, the function of Risk Management, whether for an individ- ual or for a company, is to ensure that the level of risk remains within some acceptable range, while ensuring that life or business continues to be as enjoyable as possible. It’s worth noting that different people have different appetites for risk—they are comfortable with different amounts of risk and also with different types of risk. So are different companies, with internal risk limits and credit ratings being key measures of these propensities. It’s also worth noting that people don’t really think about a risk, as- sess it, and finally do something about it. In practice, people constantly re- evaluate their situation in a way that involves continuous feedback between thoughts, senses, and actions. The same should be true for any company operating in the real world. A Risk Management process can only be effective 38 ENTERPRISE Risk Management to the extent that risk awareness, risk measurement, and risk control strate- gies are fully integrated. We’ll discuss these three components in the next sections. RISK AWARENESS Risk awareness is the starting point of any Risk Management process. The objective of promoting risk awareness is to ensure that everyone within a business is: ■ Proactively identifying the key risks for the company; ■ Seriously thinking about the consequences of the risks for which he or she is responsible; and ■ Communicating up and down the organization those risks that warrant others’ attention.

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  Project Manager's Spotlight on Risk Management

  • Kim Heldman(Author)
  • 2010(Publication Date)
  • Jossey-Bass

    (Publisher)

  As you explore risks and consequences and their impact on the organization through the course of this book, keep in mind that executives sometimes seem to defy logical reason when making decisions. They choose projects that have risks with potentially devastating consequences to the organization while brushing off other projects that to us seem like a no-brainer. So when you’re wondering about why your project wasn’t approved—my advice is don’t. Move on to your next assignment and apply solid project management and Risk Management techniques to help assure its success.

  Purpose of Risk Management

  The good news is risk isn’t the enemy. The bad news is the consequences of ignoring risk can be. What you don’t know can hurt you when it comes to risk. The goal of Risk Management is identifying potential risks, analyzing risks to determine those that have the greatest probability of occurring, identifying the risks that have the greatest impact on the project if they should occur, and defining plans that help mitigate or lessen the risk’s impact or avoid the risks while making the most of opportunity.

  Project management means applying skills, knowledge, and established project management tools and techniques to your projects to produce the best results possible while meeting stakeholder expectations.

  Risk Management means applying skills, knowledge, and Risk Management tools and techniques to your projects to reduce threats to an acceptable level while maximizing opportunities.

  More specifically, Risk Management concerns these five areas:

  • Identifying and documenting risks • Analyzing and prioritizing risks • Performing risk planning • Monitoring risk plans and applying controls • Performing risk audits and reviews

  I’ll describe each of these processes in further detail in their own chapters, so in this section I’ll stick with a high-level definition for each. These processes are highly interactive, and to understand how they all work together, you’ll first look at the purpose for each.

  Identifying and documenting risks

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  Managing Risk in Organizations

  A Guide for Managers

  • J. Davidson Frame(Author)
  • 2003(Publication Date)
  • Jossey-Bass

    (Publisher)

  It states that if something can go wrong, it will go wrong. Because of the preva- lence of Murphy’s Law on projects, a significant component of proj- ect management is Risk Management. The governing imperative of project management is to get the job done on time, within budget, and according to specifications, leading to customer satisfaction. Project Risk Management addresses the threat that the project won’t get done, or that it may encounter schedule slip- pages, or that it may experience cost overruns, or that it may not achieve the defined specifications, or that it is rejected by customers. As more and more business activity becomes project based, it be- comes important that enterprises get a handle on project risk. Other- wise, they will find that the projects they launch will seldom achieve their objectives. (Project risk is handled in detail in Chapter Twelve.) Regulatory Risk All businesses are regulated. Most are regulated at the local, state or provincial, and national levels. They also can be regulated by profes- sional bodies. For example, in the United States, good accounting prac- tice is defined by the Financial Accounting Standards Board. The types of regulations that businesses face are overwhelming, ranging from rules governing occupational safety and health, to instructions pre- scribing the proper way to store hazardous substances, to requirements to report the details of business activity for tax collection purposes. Interestingly, the principal risk of regulations is not the fact that regulations exist. Businesses recognize that a measure of regulation is necessary to provide an environment that allows business transactions to be carried out smoothly. Rather, the principal risk associated with regulations is sudden changes in the rules. You may find that basic procedures you carry out in your organization become illegal over- night with the stroke of a regulator’s pen.

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  Primer on Risk Analysis

  Decision Making Under Uncertainty

  • Charles Yoe(Author)
  • 2019(Publication Date)
  • CRC Press

    (Publisher)

  The risk manager’s role in the evaluation and comparison tasks is likely to be limited to deliberation. Risk assessors and others will do the relevant analysis. Making a decision based on the work done in these steps will usually be the risk manager’s responsibility. In some decision contexts, the ultimate decision makers may be elected leaders or other personnel removed from or above the Risk Management process. Even in these instances, however, it is usual for risk managers to make a recommendation based on their experience and intimate knowledge of the problem.

  Adaptive management

  Adaptive management is a Risk Management strategy that is useful when significant uncertainties can be expressed as testable risk hypotheses. Although there are many definitions, it usually consists of a series of steps that include the following:

  • Identify known uncertainties at the time a decision is made.

  • Include experiments that can be used to test hypotheses about the known uncertainties among the design features in the RMO.

  • Measure and monitor the results of the experiments to test the identified hypotheses.

  • Modify predictive models based on what is learned.

  • Use the revised models to identify adjustments to the RMO actions over time to increase the likelihood that management objectives will be attained.

  Adaptive management means that actions are taken to both learn about and at the same time manage the risks of interest. Adaptive Management: The U.S. Department of the Interior Technical Guide is an excellent resource available online (USDOI, 2009).

  Risk Management as described in this chapter is an iterative screening process based on scientific and other criteria. Making a decision, specifically, selecting a recommended RMO, is the final screening activity for a given Risk Management activity. It is in the risk control activities that the risk manager’s job shifts from the normative role of describing the world as it ought to be to taking action, which is the policy dimension of the risk manager’s job.

  It is not unusual for some organizations to rely on default decision rules. For example, some businesses will choose the option with the minimum payback period. Doing nothing is sometimes the default action for an organization, especially one affected by the National Environmental Policy Act (NEPA). It is a safeguard that attempts to ensure that any action taken is preferable to taking no action at all.

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