What are the benefits an organization can receive from the adoption of a risk management program?

Question

What is risk management?

What are the benefits an organization can receive from the adoption of a risk management program?

Describe the risk management process. What roles do security and capacity play within the risk management process?

What is the purpose of a risk management methodology?

Describe the various risk management methodologies used for risk assessment.

Sample paper

Risk management

What is risk management?

For any businesses to succeed in the market, they have to take the leap of faith and invest in their area of interest. All investments have to overcome risks for them to realize volumes of revenue and satisfy the needs of their customer.  A risk is often described as a threat that can affect the revenue and the return of the investment which in turn leads to loss. Risks are often divided into different categories such as basic risk, capital risk, and delivery risk.  However, to reduce the impact of the risk, investment companies have to deduce a way to manage these risks (Jordão & Sousa, 2010,). Risk management encompasses the identification, assessment, and control of liabilities and threats to a company’s capital and revenue. These liabilities could be triggered by a wide range of sources that includes financial liability and legal liability.

What are the benefits an organization can receive from the adoption of a risk management program?

As the risks and threats to business are increasing every single day, businesses are finding it necessary to implement some formal risk management system. Some of the benefits that are likely to accrue to a business that has adopted a risk management system include:

  1. Creation of a more risk-focused culture for a firm
  2. Efficient use of resources
  3. Effective coordination of regulatory and compliance matters
  4. Improved focus and perspective on risk
  5. Standard risk reporting
  6. It enables the management of a company to have a more consistent view of an approach to risk.

Describe the risk management process. What roles do security and capacity play within the risk management process?

Most of the risk management processes follow the same basic procedure and process to curb the negative impacts that may impact the business. The first step in the risk management process is the identification of the risk. Risk identification starts with uncovering, recognizing and describing the risks. The second step involves the analysis of the risk already identified to determine the likelihood of the risk occurring. The next step involves the ranking or prioritization of all the risks identified in the order of their urgency and magnitude (Valsamakis, Vivian, & Du, 2010). The fourth step involves the treating of the risk by creating a plan on how to modify these threats to make them acceptable. The final step involves the monitoring and reviewing of the risk to determine whether the risk management adopted by the management is effective. The security and capacity of information in a company ensure that the management has the necessary information, data, and statistics before they can adopt a risk management strategy.

What is the purpose of a risk management methodology?

The primary purpose of risk management methodology is to identify the best technique and method that can be implemented to identify and treat a risk to respectable levels.  Through different risk management methodologies such as risk acceptance and risk avoidance, a company has a chance to reduce the adverse effects of the risk.

Describe the various risk management methodologies used for risk assessment.

There are four major methodologies used to manage risks. These methods include:

Risk acceptance – risk acceptance does not reduce the adverse effects of a threat to a company. It is widely used when the cost of other risk management methods are too high or too expensive for a company.

Risk avoidance – involves the implementation of an action that completely avoids any exposure the identified risks. As a result, the company may talk an alternative just to avoid liability.

Risk limitation – this strategy limits the exposure f a firm to the risk through alternative action. It often combines risk acceptance and risk avoidance to decide on the best action to be taken (Saunders & Cornett, 2017).

Risk transfer – this strategy involves handing over the risk from one party to another especially a third party that is willing to accept the risk.

References

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

Saunders, A., & Cornett, M. M. (2017). Financial institutions management: A risk management approach. Dubuque: McGraw-Hill Education.

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

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