Business Risk Management

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Business Risk Management
The high uncertainty in the economic processes in the recent past has profoundly affected
how organizations operate in the present day. Evidently, the risk is too high today such that it is
unreasonable to plan without factoring risk since it profoundly affects business procedures,
operational forecasts, and financial projections. As a result, risk management in business is a
renewed focus which endeavors to ensure that probable dangers in its regular operations do not
occur. On the other hand, even if they crop up, they are minimal, or their loss is significantly
Risks in business take various shapes depending on time and circumstances. To a
significant extent, they entail any management decision that could adversely affect an
organization’s day to day smooth processes. Regarding that, most of the risks are known and
expected; thus, they are not principally catastrophic as some cases would present it. Far from the
management decisions, risks can also stem from forces of nature. In this case, some
uncontrollable events such as earthquakes or events of war among other possible dangers
overwhelm the business. In different situations, it may also refer to a future scenario emanating
from ineffective planning in the present day hence the need for a continuity plan (Sadgrove 4).
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Seemingly, every enterprise is vulnerable to some risks that include market, political,
competition, and exchange rate issues (Bromiley 269). Mostly, they revolve around strategic,
compliance, and operational lines. Strategic risk has much to do with the emergence of situations
that a business plan did not account when laying out its strategic business plan. Compliance risk
involves unanticipated or unplanned changes in the necessary laws and regulations that apply to
a business. Unexpected failure in the day to day activities translates to operational risk.
Apparently, business risks are both internal and external; the internal ones are specific to the self-
operations while the external context examines the world that the organization inhabits
(Sadgrove 23-24).
Depending on the type and magnitude of the risk, there are various risk management
techniques that an organization can apply in different situations. The entire process starts with
defining and measuring the risk (Bromiley 269-270). Risk avoidance is one of the most reliable
strategies; it involves putting effective countermeasures in place to ensure that the risk does not
occur. Separation is also reasonable; it considers keeping the most valuable assets in different
locations. Diversification is effective too. Diversification allows a business to deal with various
products or service lines. Other strategies include loss reduction and prevention which ensure
that the company accepts the probability of a risk but puts reliable mitigation measures to avoid
loss or minimize its impact. A perfect example is the presence of fire extinguishers in stores with
flammable substances.
Risk management in business is an essential input that every organization should
consider. Without it, it is somewhat challenging to explicitly define its objectives or lay out a
workable plan for the future. Furthermore, it enables sustenance in the long-term. As a result, it
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is a pivotal component to enhance not only profitability but also a continued success. Indeed, it is
a way, to manage threats cost-effectively and proactively while making priorities (Sadgrove 3).
In summation, there is no doubt that risk management in business is a justifiable
organizational input considering that risk occurrence is a significant part of business processes in
the present day. From the above discussion, it is apparent that risk management can be internal or
external. Regarding that, an organization can put in place different mitigation measures
depending on the anticipated risk such as avoidance, separation techniques, and diversification.
All in all, there is no standard way of managing risk hence the need to analyze them and pick the
one that is specific to a particular business or situation.
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Works Cited
Bromiley, Philip, et al. "Enterprise risk management: Review, critique, and research
directions." Long range planning 48.4 (2015): 265-276.
Sadgrove, Kit. The complete guide to business risk management. Routledge, 2016.

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