Risk Management - Essay Example

Introduction The risks that a business encounters in the course of its duties affect their performances in several ways. Investors are likely to shy away from businesses that have high risks unless the returns expected are very high when compared to the risks (Ayling, 2010). The relationship between the risks a business faces and the returns expected helps in determining the prices for their commodities. The risk in this case is the risk the business faces as a result of floods damaging their equipment and premises.

The loss of property resulted in the company encountering losses and disruptions in the execution of their daily activities. Step one: Risk identification Risk identification is the process of identifying threats to the operations of a business. It involves evaluating the conditions affecting the business and the damage it experiences. Risks can be considered as either stand alone or in the context of a portfolio (Ayling, 2010). Risks are termed as stand alone when the flows of cash from an asset are analyzed on their own.

The risks can also be considered in the context of a portfolio. This implies that the impacts of the flows of cash from all the organization’s assets are considered (Crouchy, Galai and Mark, 2000). The risks facing the organization will be considered in the context of a portfolio to determine the effects of losing cash from all the assets destroyed. This will assist in revealing any risks and relationships that get lost as a result of the disaster. The identification of risks involves the use of both the top-down and bottom-up approaches (Ayling, 2010).

The management will collaborate with the heads of various departments in the identification, assessment and prioritization of the risk involved. The threats identified should be the ones that affect the organization’s attainment of their strategic goals. The identification process will additionally assists the management in deciding which risks will be dealt with. The bottom-up approach involves the whole organizations’ staff involvement in the management of the risks (Ayling, 2010). On the other hand, using the top-down approach involves using the senior managers to develop strategies to counter these effects.

The organization will opt for the bottom-up approach as they will get diverse opinions on how they can counter the risks specified. In order to counter the effects of the floods, the organization will come up with several measures. This will include issues such as establishing warning systems, the construction of dams and building defenses along the rivers and coastlines. The implementation of these strategies will become an expense for the company (Crouchy, Galai and Mark, 2000). The hotel will however benefit from these moves since they will be able to salvage their property in the event that similar events occur.

The implementation of these measures will assist the hotel in meeting their objectives without disruptions due to floods. There are currently no measures that have been put in place to counter the effects of similar disasters. Step two: Risk Measurement The measurement of risks involves estimating the impacts of the risks to an organization. It also involves the process of ascertaining the consequences of the risk (Ayling, 2010). The measure to be used in calculating the effects of these risks will be the