Risk Management Strategy
Risk Management Strategy
Every organization has various external and internal factors which may affect its operations negatively if allowed to prevail. A risk is considered a hazard or a threat to the organization, it is the effect of uncertainty on objectives (Naidoo, 2002). Risk is therefore an integral part of every organization and should be addressed carefully. The business model of the organization provides an important context for management of risk in the organization. Risk management involves the assessment for risk to identify the risks that can threaten the survival of the organization and preventing or minimizing their effects on the organization. Prior to the execution of risk management strategies, the goals and objectives of the activity are outlined to govern the process.
Risk management goals and objectives should be synchronous with the objectives of the organization. They are meant to reduce uncertainty and help the organization to decide which opportunities and risk management strategies to pursue. Some of the goals of risk management include: to design and carry out a risk management process which meets the business objectives while applying the strategies put in place by the organization, to meet financial targets and build and reinforce the values that the business seeks to uphold; to ensure that questions regarding process ownership are addressed clearly to ensure that roles, responsibilities and authorities are well understood; to design and carry out a process which is global and can be used to monitor and re assess the top risk profile and point out gaps in the management of those risks based on the changes in business objectives in the business environment (Naidoo, 2002) Another goal is to ensure that they are capable of identifying future events which may affect the organization and to prevent them or minimize their effects. Also, risk management aims at defining strategies for risk management, clear accountabilities and steps of action for building and carrying out risk management capabilities and continuously improving them and monitoring continuously the information provided to decision makers in the organization to help them in the management of key risks and in protecting the interests of shareholders (Mitlatcher et al 2008).
A business organization is susceptible to various risks. Some of these risk factors include loss of reputation through problems with compliance breaches, product quality, ethics and social responsibility and community relations among others. Human resource related risks include high employee turnover, absenteeism and employee injuries among others. Also, there are risks related to corporate governance which include liability of directors and officers, business strategy, organizational culture, regulation and compliance and operational performance. Risks related to systems include software, hardware disaster recovery, net ware and web based technology. Lastly, market environment related risks include competitors, economic and political risks, cyclicality of demand and supply, volatility of earnings and substitute markets among others (Ernest& Young, 2009).
Strategies to manage these risk factors can be put in place to minimize or prevent these risks. The risk factors related to loss of reputation or a destroyed brand image can be managed by putting in place measures to curb the specific risk. The organization should design a code of conduct and make all employees aware of regulations to avoid ethical and compliance breaches, ensure product quality by inspecting products before distribution to outlets. Risks related to human resource can be addressed by motivation of employees, improvement of working conditions and performance appraisal. Also, paying attention to the welfare of employees can help to minimize risks associated with human resource. Corporate governance risks can be addressed by ensuring that decision making is done by the right people, building a good organizational culture and reviewing business strategies from time to time. The risks associated with systems can be addressed by putting in place a comprehensive security program, especially for the software and hiring the appropriate personnel for this field. Market environment risks can be managed by keeping up with business trends, ensuring product quality to ensure that demand is created and supply meets demand. The business objectives and strategies can also be adjusted according to the current political and economic climate (Ernest &Young, 2009).
Continued monitoring and adjustment is necessary to ensure that these risk management strategies last. Monitoring can be done by periodic checking on all these areas where risk is anticipated to determine whether the strategy put in place was successful. This can be done by asking for quarterly or periodic reports from the relevant departments as desired by the organization and making visits to these departments. These can be used to detect whether adjustment of the strategies put in place is required. These adjustments can then be planned for and executed as appropriate (Mitlatcher et al 2008).
Social implications and responsibilities in risk management cannot be overlooked. The implications of the strategies put in place on various parties including the employees and the community in general must be considered. Every strategy should put into consideration the welfare of employees and the impact it has on the community. This way, the organization can increase productivity in its workforce and acceptance and support by the local community.
In conclusion, risk management is a key issue in every organization and should be planned for and executed keenly. There are several risk factors present in any organization which may threaten its survival. These risks should be identified through risk assessment, and strategies should be laid down to minimize these risks and ensure that the activities of the organization run smoothly. These strategies should be monitored for effectiveness and adjusted if need be.
Ernest, & Young. (2009). The 2009 Ernest & Young Business Risk Report.
Naidoo, R. (2002). Corporate Governance: An essential guide for South African Companies:
Double Storey. Cape Town
Paul, C., & Mitlacher, L. (2008). Expanding risk management systems: Human resources and
German banks. Strategic Change, 17, 21–33. doi:10.1002/jsc.813
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