How do you identify or anticipate risk in business decisions?
? Organizations must review their external environments which are the risks that stem from economic, political, social, environmental, technological, and other external conditions.
? An organization must also understand its business objectives, strategies, and processes in order to fully understand its business risks. Management develops strategies that enable the organization to meet its objectives and these strategies determine which business processes are necessary to meet management's objectives and which processes require controls to mitigate business risk.
? Managers must remember that risks change constantly and the nature and consequences of business risks facing organizations are becoming more complex and substantial. Most managers are unprepared to handle some factors, e.g., speed of change, increased competition, higher customer expectations, rapid changes in technology. They must anticipate the risks that go with them.
? Management has to decide how much risk is acceptable and to create a control structure to keep those risks within appropriate limits. Achieving a proper balance of risk and control is the key to business risk management. When the risk and reward expectations of stakeholders are understood and a system of controls that appropriately responds to the organization's risk exposure is in place, a balance is achieved.
? If management does not ...
The solution identifies risk in business decisions. It also explains how risk can be mitigated in business decisions and the kinds of tools that can help manage risk are also discussed. Examples to explain are also provided aside from references which are included.