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The Key Risk Management Decisions - Research Paper Example

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The paper "The Key Risk Management Decisions" discusses that risk management, by definition centres on making a decision regarding balancing risks; nevertheless, risk management framework avail minimal direction as to making a multi-objective choice that features value-based trade-offs. …
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The Key Risk Management Decisions
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Download file to see previous pages The purpose of risk management centres not in eliminating risk, but to comprehend risk so that the organization can take advantage of the upside and reduce the downside. Risk management cannot be considered as an end in and of itself, but rather forms part of sound organizational practices detailing planning, program appraisal, process improvement, preparedness, and budget priority development. The core principles guiding effective risk management entail transparency, effectiveness, urgency, flexibility, adaptability, practicality, customization, robustness, synergy, and transparency. The key areas in risk management include fund (governance risk); strategy (asset allocation risk); implementation (manager risk and Implementation risk), and review (monitoring risk).
Given the uncertainties connected to estimating the costs and benefits, the function of risk management strongly connected to the process rather than the outcome. Cost-benefit analysis is a useful tool for structuring, appraising, and presenting the cost and benefits, as well as the pros and cons of interventions. This demands a coherent methodological, especially in data-restricted environments. In the context of risk management, two prominent issues deserve close attention when undertaking risk management: assessment of risk, whereby the analysis should be undertaken in a “stochastic way so as to account for the nature of exposure impacts” (Moller 2011, p.2). Second, the assessment of averted risks, whereby benefits represent risks avoided. The core benefits derived from investment in risk management centres on the minimization of future impacts and losses.
Risk management plans may detail set functions, areas, activities, projects or processes that are consistent with the organization’s risk management strategy. In order to manage risk, companies should first comprehend the risks that they may be exposed to, which necessitates the development of a risk profile that features immediate risks, as well as the indirect impacts of macroeconomic forces.   ...Download file to see next pagesRead More
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