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Art of War and Risk Management

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Universidad Autónoma de Nuevo León
Facultad de Contaduría Pública y Administración
International Business Program

Finance VI
Assignment:
The Art of War by Sun Tzu & Risk Management

Roberto Mauricio Sandoval Salazar
Group: 8Vi
ID: 1568794
Teacher: Eduardo Treviño

Ciudad Universitaria de Nuevo León, February 28th, 201
The Art of War by Sun Tzu & Risk Management

“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”

This quote comes from a translation of the Art of War by Sun Tzu, written in China in what is estimated to be 512 BC. It could seem farfetched to assert that this ancient quote is appropriate in today’s business environment, but it is actually a good metaphor for the challenges and rewards of enterprise risk management.

To adapt it to the business context, let’s pacify and update the quote by removing battles and enemies: battles will be business challenges and enemies will be risks threatening the success of your operations. Simply put, Sun Tzu posits that knowing your risks is not enough to ensure your success. Knowledge of the processes that may create the risks is also crucial for success. Incidentally, considering risks in a vacuum is also only half a solution.

Obviously, the “succumb in every battle” outcome brought about by ignorance of both the processes and the risks needs no further explanation. It is the “every victory for a defeat” outcome that deserves particular attention. Let’s take a hypothetical situation where you would consider your risks only with no concern for the business processes.

Paying attention to the risks will allow you to put controls in place and thus limit the risks, but

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