Managed risk

A managed risk rely on constantly analyzing the process consisting of indicating the purpose, stating and studying opportunities and uncertainties, formulating by the management an agreeable balance concerning the risk and possibilities of the organization. It is also awareness about resources, which should be available if any of the worst and most dangerous cases for organizational stability happens. Managed risk must be taken for the business to survive and to thrive . Risk is an integral part of the business. It can be an opportunity for an organization to gain and maintain a competitive advantage, but it can also be a threat.

A. Borghesi and B. Gaudenzi have identified the main advantages of managed risk:

• better organization efficiency thanks to supporting decision making and drawing managers' attention to setting risk priorities
• reducing crisis management because of risk assessment that may threaten the competitive advantage of the company,
• increasing reputation and competitive advantage among the community
• making analyzed decisions thanks to earlier risk identification, optimization of the cost of capital and the cost of risk
• the organization manages the risk in groups, people are not blamed for the failure
• protecting the business against possible adverse impacts on regulatory issues and formal assessment systems
• protection and increase of business value by taking care of the company's image, reputation, and relationships with partners

Managed risk process

Managed risk mainly focuses on creating the appropriate risk process. It is believed that regular and meticulous process tracking leads to success. Managed risk should have a goal from the beginning to end, for which it creates the entire process.

Implementation of the managed risk process:

1. creating a plan for monitoring and identifying risk in the intended project
2. appointing a person who will be responsible for monitoring and tracking possible risks
3. prioritize the most dangerous risk that could occur and have the most serious consequences

Enterprise risk management

Managed risk is connected with the concept of enterprise risk management. It relies on cooperation with others by collaborative purpose in risk control, finding new organization opportunities, selecting the risky decisions by all members of the group. To make these decisions wisely, exact risk limits should be set. It encourages us to make more uncertain decisions thanks to the awareness how advanced the risk is. L.Taylor mention that implementing enterprise risk management in a company reduces uncertainty and allows better decision making, but does not mean that these uncertainties in risk-taking will not occur.

Managed risk — recommended articles

Business risk management — Benefits of planning — Strategy deployment — Management by innovation — Strategic risk management — Change management — Risk response — Strategic goal — Emergence plan

References

• Arena M., Arnaboldi M., Azzone G. (2010)., The organizational dynamics of Enterprise Risk Management, Accounting, Organizations and Society
• Borghesi A., Gaudenzi B. (2012)., Risk Management: How to Assess, Transfer and Communicate Critical Risks, Springer Science & Business Media, Italy
• Henschel T. (2006).,Risk management practices in German SMEs: An empirical investigation, International Journal of Entrepreneurship and Small Business
• Hillson D. (2009)., Managing Risk in Projects, Gower Publishing Company, USA
• Hopkin P. (2010)., Fundamentals of Risk Management: Understanding, Evaluating and Implementing Effective Risk Management, Kogan Page, Great Britain, United States
• McShane M.,Nair A., Rustambekov E. (2011)., Does Enterprise Risk Management Increase Firm Value?, Journal of Accounting, Auditing & Finance
• Taylor L. (2014)., Practical Enterprise Risk Management: How to Optimize Business Strategies Through Managed Risk Taking, Kogan Page Publishers, Great Britain, United States

Footnotes

Author: Karolina Kaleta