Introduction
Our daily lives and business operations are filled with risk. On a personal level we take risks crossing the road, travelling by train and making investment decisions. From a business perspective, risk is managed at many levels - operational, marketing, legal and financial. Traditionally, much risk inherent in a business operation has been managed through insurance.
In reality, we are all aware that risk can no longer be managed on an ad hoc basis, but should be sewn into the fabric of corporate management. In other words, an organization will not be able to make strategic choices to maximise performance without having a clear understanding of the risk it faces.
People make risk decisions at all levels in an organization, ranging from individual responsibilities to collective decisions made at Board level. Allowing individuals too much autonomy within an organisation can have disastrous consequences. Consequently, compliance and adherence to regulations is important to all risk management programmes, which in turn have focused organisations on corporate governance as a form of management control. Risk analysis helps put in place checks and procedures that reduce the chance of negative outcomes.
In relation to the risk management situation, we can always relate to Nick Leeson's case, who had lost Baring’s Bank $1.3 billion on trading derivatives, destroying Barings and its reputation within a short period of time.
Inter-related Crisis and Risk management
Crisis and Risk management are two different types of management control. Crisis Management is the term that describes a process, or collection of processes that are put in place to handle an unexpected event that threatens to harm an organization, a business, an operation or an individual or group of people. Crisis management often requires decisions to be made within a short time frame, and