Measuring Risk-Risk management

Question

Measuring Risk

Organizations must be able to manage risk, but in order to do so, companies must be able to measure it. The terminology used to measure risks include risk, tolerance, and sensitivity as well as assessment, measure, and perceptions. prepare an essay of at least two pages outlining how risk measures have developed and evolved over time. Your essay should also outline qualitative and quantitative measures of risk and discuss how cultures, structures, and process impact the risk management process.

Sample paper

Risk management

When investors and companies decide to invest in any business, they usually take a great risk and a leap of faith in the unstable market.  Therefore, any investment is always associated with a form of risk. A hazard is the likelihood or the probability of harm, damage, obligation, misfortune or negative event brought on by both inside and outside elements in organizations.  Due to the increased number of risks associated with investments in recent times, investors are increasing creating and implementing safety measures to reduce the impact of the negative impact that may hit their businesses (Jordão & Sousa, 2010). As a result, risk management focuses on forecasting and projecting financial liabilities and losses together with identifying the best procedures to make sure these losses are minimized, or their impacts are minimized. Management policies, procedures, and practices are implemented to analyze, communicate and treat these threats.

With the evolution of risk in recent years where they are becoming complex, risks managers have also developed evolved and high standard risks measures to match the risks.  Some of the widely used risk measures in this era are qualitative and quantitative risk measures.  Qualitative risk measure focuses on identifying and communicating the profitability of a risk event occurring and the projected impact the threat will have a business. According to risk managers, all risks have both positive and negative impacts, and it is upon the management to identify and communicate the level of both impacts on the business in the case they occur. There are different techniques used to conduct qualitative risk assessment such as interviews, brainstorming, and risk rating scales and well as analysis of past data to identify a pattern on how risks occur (Valsamakis, Vivian, & Du, 2010,). On the other hand, quantitative risk measure help in assigning a forecasted value or costs to a risk that has already been identified.  Therefore, project managers can use this technique to numerically analyze the impact on overall investment of the established risks. However, for this technique to yield the best results, the risk manager must prioritize the threats and assign numerical values to these liabilities.

Organization cultures, which are frameworks and subsystems of shared assumptions and values governing the behavior of employees in an organization, have a significant influence on the risk management process adopted by a particular organization. Organization culture influences the conviction and corporate state of mind in an organization to persuade them to take the necessary well-informed risk decisions out of their own will but not because they are forced to take. Therefore, an effective risk management culture pays little emphases on the level of compliance compared to the willingness of the people to make the right decision.  On the other hand, and the organization framework of a company which holds a firm together.  Therefore, the organizational rules and policies put forth by the structure of an organization that outlines the roles and responsibilities of different organs can either promote or hinder risk assessment and management processes (Hopkin, 2017,). Each organ and department should be given independent and clearly defined power and roles to assist in identification of threats in their departments.  The top management should then design and create risk treatment procedures and processes to help in avoid and minimizing these threats.  Therefore, the organization structure should be flexible enough to allow changes in the designed processes and procedures of identifying and treating threats by urgency, need, and magnitude.

References

Hopkin, P. (2017). Fundamentals of risk management: Understanding, evaluating and implementing effective risk management.

Jordão, B., & Sousa, E. (2010). Risk management. New York: Nova Science Publishers.

Valsamakis, A. C., Vivian, R. W., & Du, T. G. (2010). Risk management. Sandton: Heinemann.

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