PhD Finance - Risk Management Tools - Assignment Example

RISK MANAGEMENT TOOLS By Risk Management Tools Risk management is progressively becoming an important concept of good corporate governance in today’s organizations (Organization for Economic Co-operation and Development [OECD], 2011, p. 112). For instance, many organizations have developed soporific and established measures of identifying and analyzing risks. However, it is also worth noting that other organizations have usually little or no risk management capacity (Chew, 2008, para. 2), something which could affect their performance.

Despite the fact that various risk management techniques involve high investment in terms of knowledge, time and other resources, it is important that all organizations develop and implement these techniques to mitigate or eliminate the apparent risks that might be facing the organization. According to Youngberg, Risks in the organizations can appear in many ways, and when the management has not put appropriate measures to reduce to reduce the impact of the risk, it can have serious and significant consequences on the performance of the firm (2011, p. 24). In many occasions, organizational risks appear with no or very little warning and thus organizations should always equip themselves with the appropriate risk management tools.

A good example of this is the recent worldwide financial crisis which had negative impacts on the performance of many organizations that had not put appropriate risk management measures in place. Even though it is impossible for an organization to completely eliminate risks, it is not impossible to manage and reduce the impact of risks (Munier, 2012, p. 75). Therefore it is the responsibility of the managers to develop processes and policies which can assist in identifying the various risks facing the organizations as well as analyzing the risks.

Frame points out that there are various techniques which can help in the management of risks in the organizations (2003, p. 59). The risk management techniques may include, formation of specialized committees to deal with risk other than those from accounting or finance, employment of risk officers, creation of a risk management enterprise, and giving particular attention to the microeconomic risks which do not usually receive much attention (Calabro et al., 2011, p. 49). Some of the microeconomic risks could include environmental risks such as climate change, political risks such as elections and the general risks affecting the industry.

Even though investing in tools and techniques of risk management can seem as an expense to the organization, lack of risk management measures is even more expensive. For this reason, many organizations have come up with and implemented soporific strategies that can help in the management of risk. Therefore, investing in risk management tools and techniques should not be viewed as an expense, rather, it should be viewed as a way of risk mitigation. In a nutshell, the risk tools management tools and techniques that are predominantly becoming a major element of good corporate governance in today’s organizations.

ReferencesCalabro, G. (2011). Moving from the crisis to sustainability: Emerging issues in the international context. Milano: F. Angeli.Chew, D. H. (2008). Corporate risk management. New York: Columbia University Press.Frame, J. D. (2003). Managing risk in organizations: A guide for managers. San Francisco: Jossey-Bass.Munier, N. (2013). Project management for environmental, construction and manufacturing engineers: A manual for putting theory into practice. Dordrecht: Springer.Organization for Economic Co-operation and Development. (2011). Board practices: Incentives and governing risks.

Paris: OECD.Youngberg, B. J. (2011). Principles of risk management and patient safety. Sudbury, MA: Jones and Bartlett Publishers.