Risk Management: Strategies, Tools, and Approaches

This report delves into the critical aspects of risk management within business organizations. It begins by emphasizing the inevitability of risk and the importance of proactive strategies to mitigate potential losses. The report highlights the role of Enterprise Risk Management (ERM) as a key tool, illustrating its application in managing various risks, from employee turnover to financial securities. It explores the principle of “as far as reasonably practicable” and loss prevention methods, providing insights into how organizations can minimize risks and recover resources. Furthermore, the report discusses the Enterprise Risk Management approach and the use of brainstorming techniques to identify and address potential risks. The report also examines Haimes' concept of Total Risk Management, focusing on the four main sources of failure: hardware, software, organizational, and human factors, and illustrates how these failures are interconnected. The report concludes by emphasizing the importance of training and proactive measures to minimize risks and ensure business stability.

Running head: RISK MANAGEMENT
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Name of the Student
Name of the University
Author Note

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Question 1
Risk is inevitable and speculative in every business be it large business or small and
most of the times risk implies huge loss for the business organization. Risk in business can
occur from various reasons such as increase in competition, financial loss and more (Bottanl,
Monica & Vignal, 2009). Therefore, to overcome the risk in business, organizations
incorporate different strategies of risk management. However, it should be noted for
preventing loss, risk management plays a major role and thus it helps to promote stability
with the business organization. Furthermore, in order to control internal risk, the risk
management controls it by protecting the business organization against huge market, legal
issues and operational risks (.Brustbauer, 2016). Risk management also protects its targeted
customers from various losses such as frauds, misappropriation and more. The major role of
the risk management is to provide financial securities to the firm, so that it can inspire and
encourage stakeholders to invest in the respective firm. One of the most important risk
management tools that are used by majority of business enterprises to avoid risk is the
Enterprise Risk Management (ERM) (Clark & Tunaru, 2015). This tool helps to analyse the
type risk occurred in the firm, and accordingly provides effective measure to reduce it. For
instance, in case of managing employees and to avoid risk related to staff turnover, the risk
management team needs to identify and understand various organizational laws such as
employment laws, labour union contracts and more. Furthermore, the risk management team
should also focus on the organization’s policies and practices of hiring employees and should
create a safe work culture for the employees. Furthermore, while assessing any kind of risk,
the risk management should anticipate and asses every situation and accordingly should
anticipate the results of the actions taken to overcome the loss. To prevent loss in the

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company, risk management should tend to identify the types of risk and then transferring
different types of risk in to various insurance forms. Prior to this, there are three major
qualities of a good risk management program that includes the risk management program
should not be relied upon on one single person. Secondly, with the support of the senior level
authorities in the work place will help to reduce the amount of risk and can improve for
success. Thirdly, the program of risk management works smoothly when all the goals and the
results are shared with the internal and external stakeholders (Higgins, 2006). As more
business are increases in the present days, risk has also increased, therefore business
organization should comply the laws and policies in order to reduce the risk to certain
amount.
Question 2
In order to reduce risk to a certain level, many organizations have implemented the
principle of “as far as reasonably practicable.” It implies that business organization should
imply health and safety nature in the work environment while conducting any kind of
business (Hopkin, 2017). Furthermore, the term as far as reasonably practicable also implies
that organization should analyse all the possible circumstances so that employees within the
organization should be free of risk. It also determines the amount of resources, be it financial
or any other resources that are required to manage the risk effectively. In broader terms,
organization and firms adopt this strategy so that the risk can be balanced in terms of time,
resources and cost (Khakzad, Khakzad & Khan, 2014). By using the strategy of as far as
reasonably practicable, organization sets major goals so that it could prevent risk, and if risk
occurs, the organization can gain back its resources. For instance, in case of JP Morgan huge
loss, the company managed its risk effectively by implicating the respective strategy.
However, it should be noted that the concept of loss prevention adopted by business

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organizations to prevent any kind of monetary loss in the business environment (Larson,
Mather & Dell, 2007). It is a set of practices that has been implies to restore profit within the
organization, as this can reduce loss. In any business loss occurs from many reasons such as it
can occur from human actions that include fraud, theft, vandalism and more. Therefore, with
the help of loss prevention, firm tries to avoid such loss. Though loss prevention is mainly
adopted by the retail industries, but in the present day with the increase of risk, loss
prevention is adopted by other industries also. In order to prevent loss, industries and firms
relies on four major implications that include organization need to be focussed to prevent the
loss, as it is every employee’s responsibilities to prevent loss within the organization.
Secondly, to reduce shrink, the management need to be consistent, that means policies and
guidelines should be followed thoroughly to prevent loss. Organization needs to be visible to
generate better outcomes, thus it can conduct audits twice a year to analyse the resources of
the company. And the last aspect is to be proactive rather than active to prevent risk such as
creating a trustworthy work environment will help to minimise loss in the firm. However,
there are certain limitations while adopting loss prevention method as sometimes loss can
also occur from employees such as refund fraud. Therefore, training manuals provided by the
organization to train employees to be aware of risk (Loosemore et al., 2006)
Question 3
In the present day with the increase in number of business organizations, there is an
increase in risk, therefore in order to prevent risk, organizations and firms have incorporated
the Enterprise Risk Management approach. According to the Enterprise Risk
Management, it helps in analysing the risk that causes firms failing to meet their goals and
objectives. As per the Enterprise Risk Management and Statement on Management
Accounting there are various risk management tools that are used by firms to mitigate risk

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(Makin and Winder, 2008). One of the most common tools used by organization to minimise
risk is the brain storming tool. With the help of brainstorming techniques, objectives and
goals of the organizations are stated clearly among the employees, and accordingly with
employees’ creativity they generate different types of risk that can be faced by the particular
organization. This tool is best appropriate when the approach towards the risk is unstructured
and the management encourages group members to generate the possible risk (McNeil Frey
& Embrechts, 2015).. Many small and start up organization follows the brain storming
techniques as it helps to minimise risk in small organizations. Furthermore, it should be noted
that facilitating a brain storming session requires a proper leadership skills who can guide the
other participants and the most important thing participants need to understand the major
aspect of the brainstorming tool that fits in Enterprise risk management approach (Pollino,
Thomas & Hart, 2012). The brainstorming tool sheds light on major aspects such as how risk
and the objectives of the organization are interlinked with each other and to what extent this
could have an impact on the business. As various cross-functional employees participate in
the brain storming session sharing their experiences and perspectives, therefore this can prove
to be a successful tool in identifying the risk and accordingly minimising it. For instance,
organization with the help of brain storming session analysed human risk such as succession
planning (if the team leader departs the company) and accordingly tries to reduce it by
motivating the leader with rewards and incentives (Reason, 2016). Prior to this, there are
certain limitations while applying the brainstorming tool such as, participants should have
clear assurance that the ideas provided by them should not humiliate other team members in
the group. Another limitation is that sometimes group members are not willing to express
their ideas, as they think that their ideas will be judged as inarticulate that will have no
meanings or values. This can negatively affect the risk identification process. However, if all

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these things are taken care of, brain storming tool can give fruitful result in reducing
organization’s risk (Sadgrove, 2016).
Question 4
The concept of Total Risk Management had been introduced by Haimes and
according to him it is the systematic tool that analyses the risk assessment and accordingly
manage it. The total risk management concept of Haimes identified four main sources of
failure within the business organization. The four main sources are hardware failure,
software failure, organizational failure and the human failure (Haimes, 2009). In case of
Globoforce Organization, the organization has analysed the risk with the help of four sources
of failure. However the four sources of failure are interlinked with each other and are
internally comprehensive. In case of hardware and software failure, these are the most
devastating failure in the organization. Failure in the case of technology can result in loss of
resources as well as time (Slovic, 2016). In case of Globoforce organization, by implicating
the hardware and the software failure, the organization has analysed the various risk related
to technologies that can have a negative impact on the overall business. With the help of
these sources of failure, the organization analysed the risk scenario and implemented ideas to
reduce it. The four sources of failure of Haimes identified all the internal sources of failure
were risks are more likely to occur. I t should also be noted that software risk mainly defined
as severity of unpleasant effects of software that lowers the performance. With the increase in
software complexity, the need to manage the risk also increases. Therefore, with the
implication of this failure type, the organization reduces their technical risk. As per their
procedures and guidelines, after analyzing certain risk, employees are being trained to
increase their knowledge and skills in order to deal with the software failure risk. However, it
should also be noted organizational failure and the human failure are connected to each other.

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Prior to this, as organizational and human failures are the most common type of failures that
takes place within the organization, and by implicating such failures, Globoforce tends to
examine the sources of risk and accordingly prevented it. Organizational failures result in loss
of valuable resources, management problems that lead to poor decision making process and
more (Viner, 2015). On the other hand, human failure results to fraud and theft by the
employees such as stealing of important resources of the organization. As both are
interlinked, therefore by implicating these sources of failure, Globoforce has analysed that
their employees were stealing valuable resources from the company and that has lead to huge
loss of the company. Accordingly, the organization tried to prevent the risk by providing
proper training to the employees regarding the policies and procedures, so that they can be
aware of the internal loss. It should be noted that by implicating the sources of failures,
business organizations can prevent and minimise their risk.

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