Risk Management - Essay Example

Risk Management: The Risk Level matrix According to Gerber , the global economy has provided with many business opportunities due to an ease inglobal communication. The improvement in technology has ensured that businesses in the global environment are able to expand and coordinate their operations effectively. However, with the increased business opportunities and expansion, more risks are witnessed in the economic environment (Gerber, 2010). One of the systems that is used in organizations is risk assessment tools as a system of internal and external control.

Risk assessment is based on the definition of an organization’s objectives, specification of possible risks to the business, identifying specific risks to each objective and specification of a tool to be used for risk management. One such tool that is used for managing risk in the global business environment is the risk level matrix.The risk level matrix is a matrix that identifies each possible risk to the organization’s objectives and classifies it in terms of consequences and likelihood of occurrence (Hopkin, 2010).

The risk level matrix helps the organization determine the level of concern for each risk, where common levels of concern include catastrophic, major, moderate, minor and insignificant. Once the levels of concern have been identified, the organization can then implement preventive or mitigation strategies for the identified risks. This risk management tool is an effective tool in the face of uncertainty in the global economic environment. The risk level matrix helps the organization analyze all possible risk types and prepare an advance plan in case the risk comes to pass (Hopkin, 2010).

Other risk management tools do not give the organization the ability to plan ahead for the risks that they might face. ReferencesGerber, J. (2010). International Economics. New York: Prentice Hall.Hopkin, P. (2010). Fundamentals of Risk Management: Understanding Evaluating and Implementing Effective Risk Management. New York: Kogan Page.