Interpersonal Challenge Leaders Face in Their Professional Lives - Research Paper Example

?A Study on the Interpersonal Challenge that Leaders Face in their Professional Lives INTRODUCTION Generally, it is a fact that leaders are the ones responsible for facing day-to-day challenges that occur in the particular organization. Based on how the leader copes up with and overcomes these challenges, he or she can develop the organization in the process. Mostly, leaders face both personal as well as inter personal challenges, and this paper focuses on the inter-personal problems that the leaders of various organizations face in their professional lives. It is an interesting fact that these challenges are common to leaders all over the world. Leaders are required to be sincere as well as fully committed to their professions as well as to their leadership. However, sometimes, a leader fails to fulfil both responsibilities due to certain reasons. In order to overcome such issues, the leader follows certain principles and theories, determined to turn around the crisis they face in their professional lives. In 2007, the researchers of Centre for Creative Leadership (CCL) conducted a study on the leadership trends in business and found that the leadership face various challenges as a result of new innovations, competitors with greater talent and potential, collaboration and globalization. OBJECTIVES OF THE RESEARCH: To understand the challenges of risk management that the leaders face in business. To examine the trends in leadership. To understand the various impacts of challenges of risk management. To find solutions to these challenges. To draw a conclusion by justifying the solutions for these challenges Here, the paper employs various scholarly journals and other resources for the purpose of research, and the study is based on interpersonal challenges the leaders or business executives face in the organization. This project relates with SI as it is one of the topics, which students can understand through SI by way of discussion and such other forms. This topic must be a taken in Peer Assisted Study Session (PASS) and the ideas of this study can be taken from the SI programs. The various challenges the leaders face in their professional lives are one among the popular topics of debate currently. Hence, the relevance of this study is understood and acknowledged. RESULTS OF THE RESEARCH: In the modern economy, all areas in leadership face several challenges. In the business context, there are mainly two types of challenges: internal and external. Here the research focuses on the external interpersonal challenges faces by the leaders in their professional lives. These challenges are experienced due to lack of direct control in areas such as market segment and other fluctuations within the industry. The organizations all around the world aim to go for the best leadership approach, as it is one of the fundamental as well as crucial elements responsible for the overall performance of a business. All types of business are interconnected with the present economy, thus demand, inflation, deflation, market etc influence the business to a large extent. Therefore, even a slight fluctuation in these factors can impact the performance of the organization. In these cases, the leaders do not have control over such factors, thus it transpires that a business concern faces more external changes than internal ones. Based on the study, various results have been obtained, and a crucial factor identified was the global economy. It is a fact that the global economy is still a little unstable since the economic crisis of 2007. The crisis occurred as a result of huge amounts of debt and as a consequence, political issues also emerged. A lot of fiscal adjustments had to be made due to the impact caused by the economic crisis. ”The challenges posed by the Global Financial Crisis have impacted leaders of all major Businesses” (Anwar 2). Of these challenges, faced by the leaders, risk management is one of the most important factors to be considered. Risk management includes low prices of assets, diminished liquidity in markets and recession in credit markets. Process for Capturing and Analyzing Risks: The analysis as well as capturing of risks are the key elements for the risk assessment. Through risk assessment, the leaders can get an idea of how to reduce the risks. There are several categories under risk assessment such as product, credit, market, liquidity and also it is limited to a particular business unit. “The more mature risk assessment processes yield quantitative results that can be used to allocate capital based on risk, as required by regulation in certain industries” (A Practical Guide to Risk Assessment 8). The financial crisis in 2008 led to the development of more sophisticated risk management schemes among the senior executives and the board of directors in certain organizations. This crisis led to a change in market conditions, hence certain organisations were not prepared to respond to such an economic environment. “As a result, many senior executives and their boards are recognizing benefits of strengthening the integration of strategy development activities with a richer understanding of associated risks” (Beasley, Hannock & Branson 3). Senior executives have to face complex challenges, which are caused by changes in organisations, fluctuation in market and deteriorating talents. “To respond to this new era of risk, forward-looking companies in 2011 continued to shift their risk management focus in several fundamental ways: from internal to external, from operational to strategic, and from bottom-up to top-down” (Risk in Review 3). The corporate leaders first began to identify risks in their profession, then they introduced new risk management schemes and finally they combined the risk management techniques with their corporate functions. From 2012 onwards, risk management became a more essential aspect in the whole business industry. “Globalization offers many opportunities to companies, but also poses novel sources of uncertainty and risks.” (Kytle and Ruggie1). “In August 2004, the Treadway Commission’s Committee of Sponsoring Organizations (COSCO) issued its Enterprise Risk Management – Integrated Framework after completing a developmental project spanning a three year period” (Guide to Enterprise Risk Management 1). Important Principles for an Effective and Efficient Risk Assessment: Governance due to the risk assessment process must be clearly specified: Before applying this principle, the leaders must make sure that the essential liabilities and resources of the organization are protected, and the overall risk is considered as well as evaluated through a continuous process. The correct actions must be initiated and maintained throughout the whole process. There must be a beginning as well as an end for the risk assessment process: Risks are inspected through the objectives of the organisations or in other words, to the objectives considered for the assessment of risk. According to this point, a particular risk assessment process should be carried out with the aim to achieve certain objectives of the business and when those objectives are fulfilled, the process must come to an end. This method is beneficial for the reallocation of resources. The risk rating measures are defined in accordance with the objectives of organizations specified in the scope: This principle works in accordance with the possibility and impact of the occurrence of risks. Here, the impact of factors such as such as individuals or reputation and financial aspects are taken into consideration. The risk measures are defined in both quantitative and qualitative terms. The quantitative measures have a greater accuracy and measurability. Management creates an assortment view of risks to support the decision making: This principle considers the correlation between risks on the organisation. That is, an increased disclosure to a risk may cause a simultaneous increase or decrease in another risk. The chief indicators are used for providing perception into potential risks: In the modern era, every financial or non-financial organisation creates Key Risk Indicators (KRI), which help to identify risks and as well as their severity and consequences. COSCO provides various techniques for internal control and kept extensive focus on Enterprise Risk Management (ERM). During the chaotic change, the risk management leaders began to change their focus from internal to external responses. As a result of the survey, one third of executives found that the unpredictable external factors are a source for the growth of risks. There is another significant trend in risk that is the conversion from operational risk perspective to the strategic risk perspective. This led to the emergence of new kind of risk managing terms. “Over the past three years, financial institutions have done much to address the shortcomings in their risk management” (Too good to fail? 8). The key findings are as follows. The rise of risk in financial institutions: There is a great rise in risk in the Asia-Pacific region. The emergence in the complexity of challenges in financial services: The management of complexity is one of the major problems in financial services. The risk function itself is significant to strengthen the authority: Based on the study, the risk function itself tried to move on their authority in a lower percentage. There is a less chance for improvement for the risk function and other business aspects: The risk function has been there for several years, but it is hard to find the relation between the risk function and other parts of business. Most business units have a poor relation with the risk function and other business components. Development in renovating and reinforcement of risk management has slowed now: Based on the research, it can be seen that the management invests a lot of money to deal with such crisis. The financial organisations gave more attention for the risk: Based on the research on risk management, the financial organisations were found to have allotted experts to solve the problem of risk management. IMPACT OF THE INTERPERSONAL CHALLENGE: There is another result when evaluating this problem, the leadership quality that a leader needs in their profession. “A good leader, we have come to believe, can perform successfully almost anywhere” (Executive Excess 2007 7). The leaders in business must possess skills of their own in order to manage every aspect of the business. The top leaders in business are at the top of the business enterprises, they invest in the compensation for their workers. In USA currently, it is seen that the business leaders are conscious about the workers and their hard work. A leader has a lot of responsibilities, which themselves become the challenges that he or she has to overcome. They have to serve their profession and team as well as motivate their subordinates. “A recent research report from The Conference Board (“Developing Business Leaders for 2010”) could not have been clearer about the emerging leadership challenge” (Valerio 2). Risk management is one of the main challenges faced by business leaders, which are both in financial and non financial organisations. Risk management is meant to be get rid of risk, and it consists of the actions that have taken to manage the risks. There are several business organisations facing leadership problems. A study on the business organisations shows that there are only 50% of their executives, who believe that their firm is one of the top level organisations. Based on the survey, the leaders of world’s top class organisations believe that an effective leadership is essential for them and 92% executives consider that an effective leadership can be developed from the different skills existing in the face-to-face leadership. There the executives were surveyed in order to know the skills for effective leadership. “The most frequently cited communication skills were frequency of communication and clarity/effectiveness of the message” (Criswell and Martin 8). “Three years on, the perception of risk management has changed. In the financial services industry, there is a clear consensus that serious mistakes were made with either risk management or risk governance” (Fall Guys 5). In this context, banks and other financial organisations strengthen their risk functions and develop new control structures that affix with the risk function’s authority. The board of directors creates various risk councils and makes sure that the non-executives accommodate effective supervision on the company’s risk disclosure. The chief risk officers have the veto power on the decisions over the executive directors, which are later reported directly to the non-executive directors. Even though the risk management has the unparalleled class of authority, it exists as a function in conversion. To examine the current situation of this alteration, the Economist Intelligence Unit conducted a survey worldwide on senior executives, from both the general management and the risk function. The findings of the survey are: The strategic risk management exists as under grown in many firms: The senior executives considered this for finding the importance of strategic risk management. They found the main strategic coercion such as market instability and weak demand. Only a small number of companies include risk functions in their business decisions: To reduce the risk in business, the companies must employ the risk functions, but a very less number of companies use the risk functions in their decision making. The risk managers do not spend more time on risk functions: The risk managers have to spend enough time to solve the risks, but they spend very less time because they assist the business managers in their business objectives. There is inadequate desire for investment in risk function: Even with the prominence of the companies, the risk function has a slighter recognition among the other business firms. Also, there is only a small amount of funds in training the managers for the risk function. There does not occur a permanent change in the risk function: Due to the financial crisis, the risk management has got main importance, but many of the respondents said that the current importance of risk management will diminish. The lack of experts in the risk execution: The risk management is done by the non-executive directors, most of them are unaware about the risk execution. The knowledge level of executives is higher than that of non executives. RECOMMENDED STRATEGIES: Based on the research, it is clear that there are solutions to face this challenge of risk management in business, particularly the role of business executives. “Risk management capabilities are more critical, more connected, more strategic and overall more valuable to enterprises as they execute their business plans” (Global Risk Management Study 5). To face the challenge of risk management, the only solution is the reduction of risks in the firm. The actions taken in this area is aimed at reducing risks, which is for avoiding the state of collision. It is important to reduce risks, even if the process of risk reduction is costly. This process is effective for the organisations such as banks, insurance firms, as they begin to invest for risk management since the commencement of the business. The two important risk reduction components in practice are as follows: Prevention: This is a set of actions taken to combat risks of natural calamities such as volcanic eruption, earthquake or tsunami. These prevention activities are costly and the practicability is limited. Mitigation: This idea provides some activities to reduce the degree of the occurrence of the event, and thus to achieve a maximum reduction of the loss it causes. The mitigation method is actually oriented with the risks which are repetitive or it deserves the compensations. Risk transfer: In this method, the objective is to reduce the risk to a minimum extent. Also, methods such as emergency or contingency funds, insurance policies for the protection for financial and other aspects of firms, both for public and private sector, are employed in individual and group organisations. The solutions for an active leadership in business are as follows: Be practical: It is an important aspect for any effective leadership. An active leadership will make the whole firm become active and the business must be more active. Be creative: A leader has to face many crucial situations such as unexpected things, so a leader must be always creative and strong enough to face such situations. Always face problems in a direct way: This does not mean to make conflicts and shift the responsibility to other lower level managers. This means that, a firm must act as a group with the head being the leader. Thus there is possibility of conflicts to arise in the group, so if the leader faces the problem directly without making confusion on those groups, the problem can be solved as earlier as possible. Always stand with a strong will and determination: For any organisation, there must be some opposition from someone else, but if the leader has his own capability, that is a strong basis in his stand, and then the challenges can be faced more easily. Take the most positive decision: If there is any conflict in a firm, a leader should not take a particular side, as his personal interest. The leader must take the right decision. And employ creative problem solving techniques. Make use of the opportunities of collaboration: This is a considerable choice for any organisation. The leader must look for the opportunity for work together within the group as well as outside the group. Through this, a leader can get so many new ideas for the betterment of his leadership and make relation with other firms also to help for facing the challenges in leadership. CONCLUSION AND JUSTIFICATION: This project report presents one most commonly faced interpersonal challenge in business field. In this research, the business firms have taken and considered the trends in leadership and its functioning in the professional lives of business executives. In the research, the risk management is taken as a challenge faced by the leaders in their professional lives. Risk management is one of the most important challenges facing the leaders in business and particularly, the business executives facing this challenge are common all over the world. Through this study, the interpersonal challenge faced by the leaders and the qualities for a good leadership in any profession, risk management and the solutions for risks are ascertained. Therefore, the methods for the risk management and ultimately, the common challenges faced by leaders in their professional lives are evaluated. Works Cited Anwar, Yaseen. “Leadership challenges for business success.” Banks for International Settlements. 14 Dec, 2011. Web. 11 Apr 2013. “A Practical Guide to Risk Assessment: How principles-based risk assessment enables organizations to take the right risks.” Price Waterhouse Coopers. Dec 2008. Web. 11 Apr 2013. Beasley, Mark S, Bonnie V. Hannock and Bruce C. Branson. “Strengthening Enterprise Risk Management for Strategic Advantage.” Coso (Committee of Sponsoring Organizations of the Treadway Commission). North Carolina State University. n.d. Web. 11 Apr 2013. “Risk in Review: Rethinking Risk Management for New Market Realities.” Price Waterhouse Coopers. Mar 2012. Web. 11 Apr 2013. Kytle, Beth and Ruggie, John Gerard. “Corporate Social Responsibility as Risk Management: A Model for Multinationals.” Harvard University, John F. Kennedy School of Government. Mar 2005. Web. 11 Apr 2013. “Guide to Enterprise Risk Management: Frequently Asked Questions.” Protiviti. 2006. Web. 11 Apr 2013. “Too Good to Fail? New Challenges for Risk Management in Financial Services.” The Economist: Economist Intelligence Unit. 2011. Web. 11 Apr 2013. Anderson, Sarah, et al. “Executive Excess 2007: The Staggering Social Cost of U.S. Business Leadership- 14th Annual CEO Compensation Survey.” Institute for Policy Studies and United for a Fair Economy. 2007. Web. 11 Apr 2013. Valerio, Anna M. “The Executive Leadership Imperative: A New Perspective on How Companies and Executives can Accelerate the Development of Women Leaders.” Beeson Consulting, Inc. 2011. Web. 11 Apr 2013. Criswell, Corey and Martin, Andre. “10 Trends: A Study of Senior Executives’ Views on the Future.” Center for Creative Leadership. 2007. Web. 11 Apr 2013. “Fall Guys: Risk Management in the Front Line.” The Economist: Economist Intelligence Unit. 2010. Web. 11 Apr 2013. “Global Risk Management Study: Risk Management as a Source of Competitive Advantage and High Performance.” Accenture. 2011. Web. 11 Apr 2013. Read More