...The Importance of Risk Management BUS 697 The Importance of Risk Management Altex Corporation has an interesting scenario before them; Altex proposed delivery of a missile program to the Army and won the contract for research and development. The interesting component is that the proposal states that Altex can exceed Army expectations and the PM has doubts to meet this factor. Moreover, the project sponsor is assuming that the Army will accept as low as 60% of the deliverable. Proper risk management can be the point of success or failure depending on the customer expectations. Altex Corporation has to manage expectations accordingly and highlight areas of concern to benefit the most from this defense contract award. Assumed Practices During this era of post WWII defense contracting, contractors who were not primarily qualified received government obligations to deliver products for the “sole purpose of increasing competition” (Kerzner, 2005, p.253). Project sponsors held assumptions that once a contract was awarded and after much money was spent, the Department of Defense will continue to fund projects at whatever costs necessary. The issue with this is that project sponsors are risking the assumption of their customer without consulting the customer’s intentions and expectations. “A firm’s perception of risks may be significantly different than the customer’s perceptions” (Kerzner, 2005, p. 24). The assumed practice must be properly analyzed. Case Study Questions ...
Words: 911 - Pages: 4
...Risk is widespread and dwells at the heart of every monetary activity of people, organisations and governments. Risk management is the procedure of distinguishing the risks, assessing it and after that decisions are made and executed for the best method for dealing with the risks. From the macroeconomic angle the techniques of risk management can diminish the quantity of business and modern endeavours that would some way or another get to be wiped out. The most striking advantage of powerful risk management results from loss of control. Compelling misfortune control techniques can minimise the recurrence and power of catastrophes. Risk is pervasive and spreads through each issue of life. To business segments, unanticipated circumstances make...
Words: 1477 - Pages: 6
...The Importance of Risk Management to a Business All organizations encounter uncertain events when trying to achieve their objectives. These uncertain events may arise inside or outside the organization. Each individual uncertain event that would impact one or more objectives is known as a risk. If the risk would have a negative impact on the business if it occurred, then it is a threat. If it has a positive impact then it is known as an opportunity. The combined effect of risks to a set of objectives is known as risk exposure, and is the extent of the risk borne by that part of the organization at that time. Risk has always been an inherent feature in any undertaking therefore risk management is not a new concept for organizations. The earliest application of risk management within organizations tended to focus on insurance management in terms of establishing financial capacity for the negative effects of adverse events. During the 1970s a broader view started to emerge whereby organizations began to develop a better understanding of the nature of the risks being faced and looked at alternatives to insurance. There remained, however, a focus on the negative effects of risk. Only in recent years have organizations begun to recognize that risk management, in its broadest sense, applies to both negative threats and positive opportunities. In each case a proactive approach is required, which seeks to understand the size of the possible threats and opportunities so that a decision...
Words: 1027 - Pages: 5
...Chapter 1 6 1. INTRODUCTION TO RISK MANAGEMENT 6 1.1. Risk Management-An Overview 6 1.2. IMPORTANCE OF THE RESEARCH 7 1.3. RISK MANAGEMENT EMERGANCE-REASONS AND FACTS 8 1.4. RESEARCH METHODOLOGY 9 1.5. LIMITATION OF RESEARCH 10 CHAPTER 2 11 2. LITERATURE REVIEW 11 2.1. DEFINITION OF RISK MANAGEMENT 11 2.2. DIFFERENT TYPES OF RISKS IN BUSINESS 12 2.3. CONSTRAINTS 14 2.4. RISK ASSESSMENT 14 2.5. HISTORY OF RISK MANAGEMENT 15 2.6. PROCESS OF RISK MANAGEMENT 15 2.7. Enterprise Risk Management 16 2.8. ERM&CRO 18 2.9. BANKING RISK 19 2.10. Credit risk management in UK banking sector 19 CHAPTER 3 21 3. ANALYSIS AND DISCUSSION 21 3.1. ECONOMIC CRISIS AND BANKS OF UK 21 3.2. Minimizing the moral difficulties involved in the originate and distribute model of banking. 22 3.3. Transparency of risk in financial products is essential if regulation is to work 22 3.4. Reform Basel ii so that it is not so pro-cyclical 23 3.5. RISK MANAGEMENT AND COSTS OF BANKING CRISIS 24 3.6. Costs of Risk 25 3.7. SIGNIFICANCE OF REGULATORY STYLE 26 3.8. KEY WAYS TO MITIGATE BUSINESS RISK 27 3.9. Risk dash board every bank needs 28 3.10. ROYAL BANK OF SCOTLAND 29 3.11. RISK MANAGEMENT AT KENYA COMMERCIAL BANK (KCB) 29 3.12. Risk management in hotel and tourism industry in India and in the whole world 30 3.13. The management of risk in agricultural sector in the United States of America 31 3.14. THE ROLE OF INTERNAL AUDITORS IN RISK MANAGEMENT 33 4. CONCLUSION AND RECOMMENDATION...
Words: 13332 - Pages: 54
...of compensation plans, e.g., employee profit sharing. Non profit making organisation: A non profit organization exists to provide a particular service to the community. The word "non profit" refers to a type of business one which is organized under rules that forbid the distribution of profits to owners. "Profit" in this context is a relatively technical accounting term, related to but not identical with the notion of a surplus of revenues over expenditures. The main aim of these organisations is helping the community and is concerned with money only as much as necessary to keep the organisation operating. TREASURY MANAGEMENT. Treasury management (or treasury operations) includes management of an enterprise's holdings, with the ultimate goal of maximizing the firm's liquidity and mitigating its operational, financial and reputational risk. Treasury Management includes a firm's collections, disbursements, concentration, investment and funding activities. In larger firms,...
Words: 3111 - Pages: 13
...ABSTRACT This essay will cover a list of issues facing the start of a new business and the funding of one. I will talk about the 4 terms investment banker, the stock market, financial management, risk financing, and how each one of them works. I will also discuss 1 of 3 ways that you can use when funding your business. Finally I will identify, describe, and explain everything else that deals with making a funding decision. FUNDING A BUSINESS VENTURE Unit 2-IP 3 Investment Banker Investment bankers are: They are critical figures in financial markets. They are involved in virtually all large financial transactions including mergers and acquisitions, initial public offering, and other securities offerings. An investment banker is someone who also helps companies raise capital by trading in securities and other investments. They function as: Investigation, Analysis and Research (Origination), Underwriting (Public cash offering) and Distribution. Most of the time a single investor banker performs all functions, however some investment bankers are specialized in certain functional areas only. The importance of an investment banker is actually the importance of what they do. They hold importance because of the services they provide to the economy and government. They provide advisory services for financial transactions such as mergers and acquisitions for companies. Simply...
Words: 1284 - Pages: 6
...Accounting is considered as the major helping hand to form a successive management which needs to report and analyse the business transactions. Accounting is a pathway of measuring success through the designing projects as measuring the outcomes of the projects in line with the target goal of the organisations (Elliot, Barry & Elliot, Jamie, 2004). Organisations maintain their financial reports with the help of accounting theories and policies. The international financial reporting standards also help to keep the accounting practice effectively, efficiently, and correctly. The efficient management will be built if the organisation follows the international reporting standards accurately. As a mandatory course unit of myself I need to prove my understanding about the financial systems and auditing through this report. I will gradually demonstrate my understanding on the purpose, use, importance of accounting records, accounting systems, computerised accounting system, manual accounting systems, business risk, audit risk, internal and external control systems, importance of auditing, and planning audit assignment as well as preparing audit report in the body part of my report. Task One Purpose and Use of Different Accounting Records Accounting records represents the management of all source of information in different records books. These records are ledger, journals, bank statements, adjusting journals, statement verification, invoice, brochure, and etc. The purpose and...
Words: 2394 - Pages: 10
...Running head: RISK MANAGEMENT AND THEIR INFLUENCES Risk Management and Their Influences on Corporate Governance University of Maryland University College Graduate School of Management& technology Executive Summary Implementing a risk management process in line with organizational or business goals and objectives is vital for successfully managing or mitigating risk. Risk identification, analysis, handling, and monitoring should be addressed by all stakeholders. The process should be implemented in accordance with a pre constructed Risk management plan. A well developed risk assessment will make use of the considerable number of assessments, planning, and formal risk identification performed to provide a picture of the composite or overall risk associated with an organization. Also an effective risk mitigation strategy will provide a significant increase in the confidence level that a business or organization will meet its cost, schedule, and performance requirements. Introduction Risk is an important concept that plays a major role in the success of a business and organization. Risk is defined as the exposure to injury or loss. Every decision that we make as human beings contain some form of risk and most of the time the weight of the risk determine whether we will follow through with an action or not. Risk Management is a systematic way to keep those risks in check and a way to limit those risks in impacting the...
Words: 2336 - Pages: 10
...The Importance of Risk Assessment and Management In definition a risk refers to an uncertain occurrence or an activity that if takes place could have either harmful or beneficial effects or both in realizing goals (Schatz, 2010). Therefore a risk has the potential to create threats as well as opportunities. Speaking in general terms however a risk is often seen as a loss or a negative impact that is quantifiable. In business, risks can determine the profitability of the company. As such the success of a project also largely depends on the extent to which the risks are eradicated or minimized. A risk can be influenced by both internal and external factors. Therefore in project management vital importance is given to risk management. According to Tatum (2011) Risk Management is the complete process of risk assessment and then taking the requisite steps to communicate and prevent the harmful outcomes of such a risk. In this scenario, risk assessment involves the identification, evaluation, quantification and prioritization of potential risks. A project team involved in an Information System’s project may encounter various types of risks. Project risk, security risk, system risk, organizational risk, business risk, people risk would be to name of these (Redman 2010; Vijay 2007). To effectively combat these, the project team and the project manger must develop risk management strategies. So let us now look into why it is important to manage risks well. To begin with it is found...
Words: 840 - Pages: 4
...Effective IT Risk Management Article Review Summary This paper explores what is IT risk, the importance of having it in an organization and the various aspects of IT risk management. It will also convey my perception (opinion) of the oversight of IT risk, and how vulnerabilities are identified and resolved. Then it will address the importance of why it is the stakeholder’s responsibility to help maintain risk management. This paper examines Bently, Alan’s (2010) research on explaining how IT risk can succeed in obtaining greater security and compliance within an organization. The author Bentley also explores and deciphers IT risk and how to achieve greater security and compliance in a company. He explains that to run any business effectively IT risk needs to be managed. But the IT risks have to be understood and identified to help increase network security, reduce management expenses and achieve greater compliance methodology. The article also indicated at how IT risks will be unsuccessful and a disastrous event if a business fails to identify, evaluate, and mitigate their IT risk concerns they have in regards to their business needs that can result in serious security breaches and financial losses down the road. Managing IT risk is not just for the IT staff to be focused on but for the entire organization which includes all divisions and sections that utilize its processes and technology to ensure that their company is running efficiently, because...
Words: 1847 - Pages: 8
...Essay 7.1 Role of Project Management Office October 31, 2015 Role of Project Management Office The importance of the project management office is to help businesses improve the probability of success. PMO is like an umbrella entity within an organization that overlooks project management activities, offering secure executions of projects. The project management office is the source of documentation, guidance and metrics on the preparation of project management. It is important to streamline PMO functions first by standardizing Project Management tools and techniques. This will help in avoiding overall project risks and failures. Eventually, how a project management office (PMO) is designed and staffed for maximum effectiveness depends on a variety of organizational factors, including targeted goals, traditional strengths and cultural imperatives. It is also found that by using established project management approaches increased success as measured by a project's key performance indicators of quality, scope, schedule, budgets and benefits. The Project manager’s job is to focus on the specific project objectives, while the PMO manages major program scope changes which may be seen as potential opportunities to better achieve business objectives. The survey indicates that operating an established PMO is one of the top three reasons that drives successful project delivery. The problems facing an organization, performing informal project management practices would hinder the...
Words: 463 - Pages: 2
...The Importance of Managing Risk Introduction A variety of academics have provided numerous definitions of risk, with some being centred around a specific business environment and others being a more generic definition of risk. A comprehensive risk definition that is tailored around the business environment can be defined as an event that will likely lead to substantial losses for an organisation, which could also be made more dangerous by the likelihood of the risk event occurring (Harland, et al., 2003). Furthermore, The English Oxford Dictionary defines risk as "A situation involving exposure to danger" or "The possibility that something unpleasant or unwelcome will happen". (Oxford Dictionary, 2015) Kaplan and Garrick (1981, p. 12) provide a simple equation for risk, which is "risk = uncertainty + damage". They believe that it is irrelevant as to what context risk exists in, and that the same equation can always be used to identify and manage risk. However, risk can still be categorised differently depending on what facet of the organisation it is affecting. For example, supply chain risk can be defined as ""the variation in the distribution of possible supply chain outcomes, their likelihood, and their subjective values" (March & Shapira, 1987, p. 1404). This is quite different to other, more generalised definitions of risk. Risk Management Before a risk management strategy can be decided upon, the risk event must first be identified. An organisation should conduct...
Words: 2172 - Pages: 9
...Individual Project 2: Enterprise Risk Management Ashley Jonsson BUSI 601 Liberty University October 5, 2014 MEDA AB and Enterprise Risk Management MEDA AB is an international specialty pharmaceutical organization with its headquarters set in Stockholm, Sweden. MEDA specializes is offering cost effective pharmaceuticals in areas such as respiratory, cardiology, dermatology, pain and inflammation, central nervous system (CNS), and over-the-counter (OTC) medicines (MEDA AB, 2012, p. 18). MEDA’s vision is to “become a world-leading specialty pharma company with a focus on sustainable and profitable growth to provide value for our patients, shareholders and other stakeholders” (MEDA AB, 2014, para. 1). MEDA is currently present in about 60 countries and is staffed with over 3,000 employees (MEDA AB, 2014, para. 1). This purpose of this paper is to discuss a specific contemporary management technique that MEDA is not actively using at this time but could benefit from its implementation. The contemporary management technique chosen for MEDA is the use of enterprise risk management (ERM). Rationale for selecting enterprise risk management MEDA is a very large global organization and as such it is “important for global organizations to think about country-specific treatment of risks,” and to gain an understanding of how to control these risks in a manner that will allow them to align risks “with their business strategy, develop an overall approach to how they define, establish...
Words: 2320 - Pages: 10
...is understanding the documenting the internal control, assessing the control risks, and performing tests of the controls and reassessing control risks. Phase 1: Understand and Document Internal Control Phase 1 allows the auditors to work efficiently by getting a basic understanding of the organizations internal control. There are five components to internal control: control environment, risk assessment, control activities, monitoring, and information and communications. The following checklist will allow the audit team to gather evidence and focus their efforts in reviewing what aspect is at more risk and requires more review (Louwers, 2007). Yes/No Comments Control Environment Evaluation 1. Is there a written code of conduct displayed for employees to view? Yes 2. Are all employees aware for their goals as an individual? Yes 3. Is there a written document describing each employee’s job description? Yes 4. Would you consider your financial reporting attitude to be conservative? Yes 5. Are actions taken when an employee is found acting unethically? No Risk Assessment Evaluation 6. When developing strategies and objectives are the board of directors involved? Yes 7. Are processes evaluated and updated periodically? No 8. Is risk assessment performed at all levels of the company? Yes 9. Are assumptions and forecasts realistic? Yes 10. Are risks viewed as impacting other departments? Yes...
Words: 851 - Pages: 4
...Introduction: The primary purpose of financial and accounting management is to organize, plan, control and direct the financial and accounting activities, but to ensure that every stakeholder is adequately served. The effectiveness of financial and accounting management, therefore purely depends on the policies, regulations and frameworks that are designed and being evolved from time to time. According to Gray, Owen and Adams (1996) financial management is the core business discipline which is meant to ensure that financial resources are deployed in the most effective manner, within the best interest of every group of stakeholder. Moreover, the importance the financial management also increases in current business context because of the fact that economic and financial contexts have become uncertain and unpredictable in every region across the world. At the other end, financial management also supports the business activities and operations which include investment decision making, pricing, financial reporting as well as to meet the legal and regulatory obligations. This report also focuses on the different aspects of financial analysis and management to reflect its validity, reliability and usability in practice. The purpose of this report is to understand and examine the different aspects of financial management, which will be helpful to understand the effectiveness of financial management and its different aspects. In order to achieve the report’s objectives, below paper...
Words: 3024 - Pages: 13
