Basically, risk will have direct effect on our objectives. And the bad risks will obviously impact our chance of success.
Risk management is that’s why important because it deals with the Bad risk which can affect our success.
Managing the upside of risk:
Historically, the focus of risk management has been on preventing loss. However, recently, organisations are viewing risk management in a different way, so that:
- Risks are seen as opportunities to be seized (as discussed above)
- Organisations are accepting some uncertainty in order to benefit from higher rewards associated with higher risk
- Risk management is being used to identify risks associated with new opportunities to increase the probability of positive outcomes and to maximise returns
Monitor risk on an ongoing basis.
Identify new risks.
To identify changes to existing or known risks so amendments to the risk management strategy can be made.
To ensure that the best use is made of opportunities.
Risk management is a key part of Corporate Governance.
Managing the upside of risk:
Historically, the focus of risk management has been on preventing loss. However, recently, organisations are viewing risk management in a different way, so that:
– Risks are seen as opportunities to be seized (as discussed above)
– Organisations are accepting some uncertainty in order to benefit from higher rewards associated with higher risk.
– Risk management is being used to identify risks associated with new opportunities to increase the probability of positive outcomes and to maximise returns.
– Effective risk management is being seen as a way of enhancing shareholder value by improving performance.
