Risk Management Practices: Benefits and Limitations - Dissertation Example

Risk management is how the adverse effects of risks may be reduced and newer opportunities may be exploited. The importance of a study on risk management practices mainly lay on understanding how the process can benefit an organization such that organizations can adopt the process realizing the feasibility of the process.
In today’s ever-changing business world, there is a huge need for every organization to be capable of facing threats and risks and managing them to an extent that will protect the company from losses. Formal processes are hence a necessity. A business organization may have several divisions that function together to achieve the organizational goals and objectives. Integration of a formal risk management process along with these functions benefits the organization in a lot of ways. It helps an organization through the identification and analysis of risks, generating measures to manage them, and monitoring and controlling them to analyze changes that may be required in the process.
The importance of a formal risk management process can be understood from the benefits that it has provided to the companies that have already incorporated the process within their system. Also, several surveys add to the value of the process as they reflect on the improvements in performance that many organizations have experienced through the incorporation of such a process. Although limitations are also a part of every process, yet a formal risk management process tends to provide a company, by all means, to encounter any risk by carefully planning measures to exploit and manage them for positive utilization, thereby maximizing organizational profits.
A risk may be defined as a condition in which there occurs a variation from a preferred result that is anticipated or expected. A level of risk may not be measurable but the probability of the occurrence of any adverse situation may be expected to range between 0 to 100 percent. Risk management is essentially a scientific-methodical approach to the difficulty of managing risks faced by individuals or organizational institutions. (Gallati, 2003, pp.8-11). Organizations deal with a very broad variety of risks that can impact the consequences of their operations. The risk-averse events may restrict an organization from achieving its goals and objectives, may increase the opportunity risks, as well as create insecurity about the outcomes. Thus, risk management needs to put forward a combined approach to the appraisal, management, and supervision of such risks. (Hopkin, 2010, p.3).
Risk management is a developing notion having its origin in the corporate insurance sector. Supposed to have begun in the 1950s, the advent of risk management as an autonomous approach indicated a ground-breaking change in beliefs and attitudes, stirring when thoughts towards a variety of insurance approach altered. Operations research appears to have been initiated during World War II when scientists were involved in building on methods for supporting military operations.