Identifying and Managing Risk
BUS 401 Principles of Finance
Identifying and Managing Risk
The Risk Management is a process of identifying and providing an overview of a corporation or businesses goals in comparison to any risks associated with future plans. In order to obtain this, an organization must ensure that in the review of the company’s goals, procedures must be in place to ensure any unexpected events that may develop are taken care of. My goal of this paper is to highlight the processes created by Dr. James Kallman; an expert in risk management as well as compare his findings to the processes of other experts in the realm of risk management.
Risk Management is a decision making process that combines numerous processes and procedures in business operations (Kallman, 2007). The basic components of Risk Management are leading, planning, organizing and allocating resources. It incorporates evaluation of overall goals of a company versus risks related to projected events. As a risk manager, one is tasked to take courses of action to ensure the organization heads in a successful direction. To assist with this process, Kallman created a method that provides a forcast of organizational goals, and with this method managers could conduct their risk management evaluations with little trouble. With the combination of precise analysis, evaluation of organizational resources and an environmental report of internal and external factors allow for any organization to new procedures and processes to achieve success.
As part of the Risk Management process, risk managers are charged to compile realistic and achievable steps to obtain their objectives. When the risk is measured, all three variables should be measured. These measures are known as the consequence, the difference from the expected outcome and the timing of said consequence. Two ways to predict future outcomes are by using past observations or simulations to estimate future outcomes (Kallman, 2007). However, one should always bear in mind that regardless of the risk events from any category can be fatal to a company’s strategy and even to its survival (Kaplan & Mikes, 2012), but the expectation of a risk manager is to predict and avoid those risks through decision making.
All risk managers are set to achieve a certain goal and allows operations inside an organization to contribute to a shared society and unite the organizations assets. This is mainly accomplished through the proper arrangement of realistic objectives and assets that are made accessable. The arranging procedure additionally highlights the company’s potential towards meeting that goal, and its is imperative to understand the organizations goals and its risk philosophy before making any inferences from the measurements that are obtained by the organization (Kallman, 2007). To have a successful risk management process throughout organizations would be by attaining goals set through regardless of what it is would be by attaining goals set through the maximizing of resource use. Processes that are organized have a substantially greater chance to have measured accuracy verses ones that are not organized
Risk Management is simple yet challenging, but the processes highlighted by Kallman claims that risk management is simple because the number-crunching is fairly straight forward. The data is gathered, a measure of central tendency is found, the standard deviation, the coefficient of variation, and the time of occurrence and duration. Combined with a graph of the data, this information provides the risk manager with important information to make decisions with assurance. It is the uncertainty that makes risk measurement a challenge and sometimes an intuitive exercise. First, one is uncertain that the data truly represents an organization’s future. Next, one is uncertain about the assumptions made in the modeling. And third, one is uncertain if other stakeholders will appreciate the hard work one has invested in creating important decision making information (Kallman, 2007).
Kallman’s risk management process is combined with the technique of direction and leadership. The effectiveness of his process is appealing since the organization is devoted to the achievement of the set goals. Great management and leadership will yield an engaged point of view towards set objectives and dedication from any organization even where troublesome events happen to occur.
Hickman, K. A., Byrd, J. W., & McPherson, M. (2013). Essentials of finance. San Diego, CA:
Bridgepoint Education Inc.
Kallman, J. (2007). Measuring risk. Risk Management, 54(7), 48-49. Retrieved from
Kaplan, R. S., & Mikes, A. (2012, 06). Managing risks: A new framework. Harvard Business
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