Risk Management
Risk Management
Risk management is the process of evaluation and quantification of business risks in order to take the necessary measures to control or reduce them. Risk management in organizations includes the methods and processes used to manage risks and seize opportunities related to the achievement of their objectives. By identifying and proactively addressing risks and opportunities, business enterprises protect and create value for their stakeholders, including owners, employees, customers, regulators, and society overall. Risk management expands the process to include not just risks associated with accidental losses, but also financial, strategic, operational, and all other risks that a business might be exposed to. Different organizations face different kinds of risks according to their core business, culture and external environment. Therefore, there is no one-size-fits-all approach of handling risks within an organization. However, one can argue that, for risk management to thrive in any organization, risk awareness must be embedded in the wider culture of the enterprise through easily understood behaviors. Risk management is most successful when it is explicitly linked to operational performance. The complete hierarchy from top to bottom of the managerial pyramid should be completely aligned on risk to ensure that there is a consistency of approach. They should understand instinctively that good performance includes good risk management.
At Tesco, a global grocery and general merchandise retailer headquartered in Cheshunt, United Kingdom, customer satisfaction is the main objective and measure of operational performance. Of course, achieving such objective is not a walk in the park. As a simple business – buying and distributing goods, marketing and managing cash – Tesco’s principal risks revolve around the robustness of these processes. Any failure in the supply chain, for example, damages the business in the eyes of customers and hence the
Risk management is the process of evaluation and quantification of business risks in order to take the necessary measures to control or reduce them. Risk management in organizations includes the methods and processes used to manage risks and seize opportunities related to the achievement of their objectives. By identifying and proactively addressing risks and opportunities, business enterprises protect and create value for their stakeholders, including owners, employees, customers, regulators, and society overall. Risk management expands the process to include not just risks associated with accidental losses, but also financial, strategic, operational, and all other risks that a business might be exposed to. Different organizations face different kinds of risks according to their core business, culture and external environment. Therefore, there is no one-size-fits-all approach of handling risks within an organization. However, one can argue that, for risk management to thrive in any organization, risk awareness must be embedded in the wider culture of the enterprise through easily understood behaviors. Risk management is most successful when it is explicitly linked to operational performance. The complete hierarchy from top to bottom of the managerial pyramid should be completely aligned on risk to ensure that there is a consistency of approach. They should understand instinctively that good performance includes good risk management.
At Tesco, a global grocery and general merchandise retailer headquartered in Cheshunt, United Kingdom, customer satisfaction is the main objective and measure of operational performance. Of course, achieving such objective is not a walk in the park. As a simple business – buying and distributing goods, marketing and managing cash – Tesco’s principal risks revolve around the robustness of these processes. Any failure in the supply chain, for example, damages the business in the eyes of customers and hence the
References: • Margaret Woods, Reporting and Managing Risk, A look at Current Practice at Tesco, RBS, Local and Central Government (Chartered Institute of Management Accountants, Research Executive Summary Series, Volume 6, Issue 8, July 2010) • Rene M. Stulz, 6 Ways Companies Mismanage Risk (Harvard Business Review, March 2009) HELPS ME