Role and Benefits of operational risk management for the Company
2.1 Freeing Up Capital
A process of risk management that is streamlined ensures that operational capital is allocated and utilized efficiently. This will eventually allocate more capital to income earning activities (Auer, Brink den van, & Mormann, 2014). By so doing the Company would be using its capital resources optimally to achieve its main objectives of growth and profitability. For example the Company can use the pareto principle 80/20 rule in the allocation of its capital resources by allocating its resources to the departments that contributes 80% of the Company’s revenue although such departments may account for only 20% of all the Company’s departments. This is critical
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Less volatility is linked to the attainment of profit and revenue targets which is essential in maintaining or increasing market value of the Company. The increase in market value of a Company will attract potential investors and appeal to other interested stakeholders such as the Government as it will be able to meet its tax payment obligations and comply with minimum solvency requirements.
2.5 Optimal risk sharing
The Company shall be more aware of its risks and the mitigation measures instituted. Such awareness is critical in determining the level of its risk appetite and the risk transfer plan. This will then ensure that it has benefited from its own initiatives of risk prevention and control programs through lower costs of insurance and reinsurance
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The level of risk management will therefore determine the credit rating. The Company will obviously want to have a good credit rating by good operational risk management practices. By so doing, the Company will attract reputable organizations as its policyholders. This will not only increase the gross written premium but also avoid fraudulent claims in view of the high level profile of such
Risk management is the system in which companies assess potential liabilities within an organization (Raso, Gulinello, 2011). Through this process information is gathered, assessed, and implemented to avoid these potential risk. Risk managers are beneficial to their organizations because not only do they save money but they can also save lives. In the hospital setting where mistakes can cost someone their lives, risk managers work to develop protocols to help prevent human error. Information is gathered through the process of evidence based practice as well as guidelines in place by best practice. Not only do they help protect the lives of the patients within the facilities, they are also responsible for ensuring staff safety. A risk manager’s responsibility is multi-faceted and complex. They will prevent potential litigations by implementing patient safety protocols, reduce risk to associates, and reduce cost to the organizations.
The price and liquidity of the company’s shares may be affected by market conditions as a whole no matter how well the business is run.
As a project manager what can or should you do if your company 's sales force signs project contracts that are either underspecified or underpriced?
Seize opportunities for gains through organizational improvement and growth, so that risk management, at its best, enables my organization to “be all it can be.” (Head and Herman, 2002 pg. 98)
Obviously, financial establishments can endure breathtaking misfortunes notwithstanding when their risk management is top notch. They are, all things considered, in the matter of going out on a limb. At the point when risk management fails, be that as it may, it is in one of the many fundamental ways, almost every one of them exemplified in the present emergency. In some cases, the issue lies with the information or measures that risk directors depend on. At times it identifies with how they recognize and impart the risks an organization is presented to. Financial risk management is difficult to get right in the best of times.
... recommendation is that better protection should be provided for the management of financial risk. Benkol could use the Net Present Value technique to cover that. Benkol also lacks a proper risk assessment method. Benkol does not use a risk assessment matrix, nor scenario analysis and probability analysis is done by the project manager using subjective assumptions. This can be refined by implementing proper probability analysis and risk assessment matrix.
Pike (1988) found that in 1986 only 26% of firms surveyed used specialist staff to carry out at the capital budgeting processes, but 86% carried out a formal risk process. This brings into question the validity of the processes
Risk management purpose is to prevent and reduce the frequency and severity of potential losses. Loss prevention programs promote avoidance of losses, measuring the loss frequency. Some examples are safety programs implemented to prevent workplace injuries, fire detectors, burglar alarms, and other protective devices to prevent losses caused by fire and theft. Insurance companies offer discounts to organization or individuals taking loss prevention measures as incentive for their participation.
The risk mitigation activities for this company should involve learning on the trends of the industry so as to make sure that they remain competitive. This will make their finances to perform consistently well and investors will be impressed and invest even more. As well, the company should do research on shows hat that
The risk management process needs to be flexible. Given that, we operate in the challenging environment, the companies require the meaning for managing risk as well as continuous improvement in identifying new risks that will evolve and make allowances for those risks that are no longer existing.
Mismanagement of risk: Not proper management of “risk results in credit crunch due to the inter-connection relation between business activities and management”. (Priddy, 2008) This results in risk. As a result, there is not “proper reporting of risk and financial transaction”. (Priddy, 2008) It results in non clarity. As a result the situation leads to crisis.
Identify the potential risks which affect the company and manage these risks within its risk appetite;
As has been discussed before, risk identification plays an important part in the risk such as unique, subjective, complex and uncertainly. There are no two identical leaves in the world; similar, there are no two exactly the same risk either. Hence the best risk manger could not identify risk completely. Besides, risk identification assessment is done by risk analysts. As the different level of risk management knowledge, practical experience and other aspects between individuals, the result of risk identification may be difference. Furthermore, the process of identifying risk is still risky. Once risks have been identified, corporations have to take actions on limiting risky actions to reduce the frequency and severity of risky. They have to think about any lost profit from limiting distribution of risky action. So reducing risk identification risk is one of assessments in the risk
Risk mitigation is also the process of controlling actions, which are identified, and selecting the suitable ones to reduce risk according to project objectives (Pa, 2015). Risk mitigation is important in IT organizations in so many ways. According to Ahdieh, Hashemitaba, Ow (2012), mitigation of risk provides a mechanism for managers to handle risk effectively by providing the step wise execution of the risk handling (as cited in Pa, 2015, pg. 49). Some risks, once identified, can readily be eliminated or reduced. However, most risks are much more difficult to mitigate, particularly high-impact, low-probability risks. Therefore, risk mitigation and control need to be long-term efforts by IT project managers throughout the project lifecycle. There are three types of risk mitigation strategies that hold unique to Business Continuity and Disaster
.... It is the directors’ responsibility to identify potential risks that the company is likely to face or risks already faced by the company. This is basically to prevent such risk to arise again that may negatively affect the company’s operation. By identifying the risks, it allows the company to prepare step by step solutions to prevent or overcome such risk beforehand. It also allows company to take control of risks before risks affect the company seriously.