CHAPTER 12 Table 12.

1: Typical Areas of Organizational Risk

PRACTICAL GUIDELINES IN REDUCING AND MANAGING Financial Commercial Strategic Technical Operational
RISKS Accounting Loss of key
decisions and personnel and
You can’t identify and manage risks without Objectives. If you know what practices tacit
you are achieving, you could also know what could be hindrance for those. knowledge
Treasury risk Failure to
Practical Guidelines in Managing and Reducing Enterprise – wide Risk
comply with
inherent in business activity is best achieved by applying the principles and
legal
techniques appropriate to the situation. regulations or
UNDERSTAND THE NATURE OF THE RISK codes of
practice
The willingness and readiness to take personal and financial risks is a Fraud Contract
defining characteristic of the entrepreneurial decision-maker. A study found conditions
that Europe strategies focus on avoiding and hedging risk, while Anglo – Robustness of Poor brand
American companies view risk as an opportunity and accept risk information management
management as necessary to achieving their goals. management or handling of
systems crisis
Successful businessmen and decision – makers make sure that the risks Inefficient Market
resulting from their decision are measured, understood, and as far as cash changes
possible, eliminated. They also go beyond the direct financial perspective and management
actively manage risk as it affects the whole organization. Inadequate
insurance
Accepting that risks exist is a starting point, but it is most important to create
right climate for risk management. We need to understand why control
systems are needed; requires communication and leadership skills so that
standards and expectations are set clearly and understood.
IDENTIFY AND PRIORITIZE RISKS
Identification of significant risks both within and outside organization is
crucial and allows to make informed decisions which makes it easier to avoid
unnecessary surprises.
Humans are also a considerable factor because people behave differently and
inconsistently when making decisions involving risk. They may be
overconfident, overly concerned or may overlook the issue risk.
Risk is always with us, “to be alive at all involves some risk”. Identifying
risks helps with defining the categories which they fall. It allows for a more
structured analysis and reduces the chances of a risk being overlooked.