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Risk Management - Term Paper Example

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This work "Risk Management" describes methods of risk management, evaluation of risks to mitigate. The author outlines the benefits of this field, its advantages, and also the effects of poor risk management. From this work, it is clear that proper risk management leads to the organization creating a good name among the public. …
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Risk Management
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Download file to see previous pages Financial risk is the risk of getting losses because of market changes or the operations of competitors in the market (Das, 2006 ) On the other hand, operational risk refers to those risks of losses due to non-financial business inputs, outputs, and operations. Operational risk can be further classified into pure and speculative risks. Pure risks are those that on occurrence lead to loss and if they do not occur, they would not lead to any profits either. Speculative risks are those kinds of risks whereby on occurrence they lead to a loss but when they do not occur, they lead to profits (Das, 2006). These two kinds of risks occur on a daily basis in any market situation and each business unit needs preparation for them.
Many businesses have failed as a result of risk occurrence due to poor management of the risks. Risk management requires a clear understanding of the risk been to take and the firms' appetite for risk. For a risk management plan to be successful, the personnel in charge of risk management must be in a position to discover the risks posed in running the organization, the actions that should be taken and the culture that should be adopted to ensure that the risk management plan works out effectively. It is the role of the risk management personnel to ensure that shareholders and other stakeholders do not get losses because of risk occurrence.
From a director's perspective, every director wants to ensure that his company is free from all losses particularly financial losses (Hiles, 2002). Their main objectives are increasing the levels of profits as well as preventing any loss. They are the top people in the organization and hence they look forward to seeing their juniors run a ‘healthy’ organization. Managers have to accentuate monetary and non-monetary expenses using the right tools and methods of risk management. They have to take caution on the occurrence of events such as customer over-reliance and market situations like the merging of competitors. Through the identification of risks before they occur, managers will have the time and room to prepare solutions. ...Download file to see next pagesRead More
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