Risk management is process by which organizations identify the risks to which they are exposed. Moreover, risk management also ensure organizations to develop and implements a plan through which they avert losses or lessen the impact of the risk on the business. …
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At the start up phase of any business, the magnitudes of risks remain the same. However, as the business starts to grow, the risk associated with it also grows. This is primarily because of the fact that, the resources involved in the business also increases proportionately. Hence, large organizations are prone to more business risks than a small and medium sized enterprise. As a result, implementation of risk management technique positively impacts their business. For a large organization implementation of risk management helps them to enhance their shareholder value, reduction in total cost of risk, improves business resiliency and also increases the operational efficiencies (Jolly, 2003). On the other hand, the intensity of risk for the SMEs is less in comparison with large organizations. This is primarily because of the fact that they do not function on a large scale and operates with less resources. Hence, they have less exposure to business risks and thus implementation of risk management techniques will have hardly have any positive impact on the business operation. Moreover, it also increases the operating cost of a business.
In response to one of the group members namely Penina, although risk management helps the organizations to assess the business risks, but I believe, it mostly benefits organizations which operate on a large scale. On the other hand, the common risks for the SMEs can be identified without any implementation of risk management techniques. Thus, the notion of risk plays a major role in determining risk management. ...
On the other hand, the common risks for the SMEs can be identified without any implementation of risk management techniques. Similarly in this context, the notion of risk intensity plays a major role in determining the importance of risk management. For example, in a large construction company, there are more workers who perform their duties at high altitudes, more number of office staff and more number of cars are required to provide logistic service in comparison with an organization which operates on a small scale. So, the large organization can anticipate having more riskier events, simply due the fact that they have more exposure or opportunity for facing a risk event. In simple words, the probability of risk increases proportionately with the amount of resources involved. Therefore any level of investment pertaining to risk management by the large organizations will have high return on investment. Nevertheless, I agree with Penina with her statement that all business face future risks however it is dependent upon the size, industry and operations of that particular company. Now in the context of a small and medium sized enterprise, investment pertaining to risk management has low return on investment. The SMEs employ less number of workers and also involve less quantity of resources. This depicts that, the probability of a risk event is very low in comparison with large organizations. Hence it can be justified that the return on investment pertaining to risk management by the SMEs is low. Penina highlighted that running a business regardless of size can be a dangerous occupation with many different types of risk, as risk is an inherent part of any business, economy and other issues can often increase
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