Dec
03

Entrepreneurial Growth Learning Module E

Learning Module E

Risk Management & Financing the New Venture Links

 

Risk Management

Risk is an inherent characteristic of organisations, roles and everyday life. Managing risks can be far more profound than just improving financial performance-some risks can disrupt not only a single company, but entire industries, forcing those that want to remain successful to reinvent their business models

 

Types of Business Risk

–       Strategic Risk: They are the risks associated with the operations of that particular industry.These kind of risks arise from

–       Business Environment: Buyers and sellers interacting to buy and sell goods and services, changes in supply and demand, competitive structures and introduction of new technologies.

–       Transaction: Assets relocation of mergers and acquisitions, spin-offs, alliances and joint ventures.

–       Investor Relations: Strategy for communicating with individuals who have invested in the business.

–       Financial Risk: These are the risks associated with the financial structure and transactions of the particular industry.

–       Operational Risk: These are the risks associated with the operational and administrative procedures of the particular industry which are very common in today’s generation.

–       Compliance Risk(Legal Risk): These are risks associated with the need to comply with the rules and regulations of the government.

–       Other risks: There would be different risks like natural disaster(floods) and others depend upon the nature and scale of the industry

By addressing these threats and carefully considering risk-return tradeoffs, any organization can elevate risk management to the boardroom level and use it as a tool to innovate, rather than simply manage.  By altering what decisions must be made, when they are made, who makes them, the incentives driving the decisions and why they are made, firms can invent business models that change the risk-return tradeoff.

Risk management solutions include insurance, disaster relief, recordkeeping, and planning.  There are risk management professionals who can help do risk assessments in a variety of areas such as, enterprise risk management, strategic risk management , natural catastrophes, reputation risk, cyber risk and international security.

 

Institute of Risk Management:

–       Promotes the importance and relevance of risk management

–       Connects risk management to the needs of the business community

–       Is independent and works collaboratively with a wide range of partners

–       Is relevant to all sectors and risk disciplines

–       Believes in universally applicable approaches to risk, but recognises the importance of risk specialists

–       Understands that risk is more about people than processes

–       Operates in a highly practical and accessible way

 

The Institute of Risk Management offers training in areas like Risk Appetite.  Risk appetite can be defined as ‘the amount and type of risk that an organization is willing to take in order to meet their strategic objectives.  Organizations will have different risk appetites depending on their sector, culture and objectives. A range of appetites exists for different risks and these may change over time.

There are also regional groups that provide a forum for members from a diverse range of organizations, risk disciplines and sectors to network, exchange views and share best practice with peers locally.

 

Certifications in risk management are also available.  This practical qualification addresses the real issues facing organizations in the financial services sector, particularly banking and insurance.  The Certificate analyses how regulatory environments have driven approaches to managing risk, and explores whether the global financial crisis has exposed the inadequacy of previous approaches.

Another example of Risk Management business solutions is iJET is an intelligence-driven provider of operational risk management solutions, working with more than 500 multinational corporations and government organizations. Capitalizing on our proprietary technology and network of security, intelligence, and geopolitical experts, we deliver a full array of customized intelligence, preparedness, and response solutions. Our solutions enable organizations to protect their assets and proactively prevent and mitigate threats and risk that can impact operational performance.

The best risk insurance is prevention. Preventing the many risks from occurring in your business is best achieved through employee training, background checks, safety checks, equipment maintenance, and maintenance of the physical premises. A single, accountable staff member with managerial authority should be appointed to handle risk management responsibilities. A risk management committee may also be formed with members assigned specific tasks, with a requirement to report to the risk manager.

 

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