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Risk Management Trends and Developments

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Prepare a response in which you examine at least three new trends and developments in risk management. Additionally, examine future challenges to risk management strategies. Be sure to address the following:

1. Summarize each trend, development, and challenge
2. Discuss the significance of each (pros and cons)
3. Discuss the implications of each in the business environment

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Risk Management Trends and Developments

Risk is something that can be found in all parts of life, both in business and on a personal level. The main priority of a corporation is to try to avoid risks if possible, and to manage risks that they cannot avoid. Businesses deal with two types of risks; pure and speculative. Pure risk is when a hazard provides only a negative outcome. An example of a pure risk would be a home getting destroyed in a natural disaster. There is no positive outcome in this scenario. Speculative risk is when there could be either a positive or negative consequence. An example of speculative risk is one company merging with another company. There are possible positive and negative outcomes. The company could fail and go bankrupt due to the merger, or it could be highly successful and profitable.

Risk is typically contributed to the various uncertainties that exist in the world around us. Some of these uncertainties include industry uncertainty, (market and competitive uncertainty), general, (political or governmental instability), or firm specific uncertainties, (liability, research and development and operating).

Most companies have a risk management process that incorporates using traditional management techniques to solve a problem along with using predefined core steps that may include: setting risk return goals, identifying and evaluating the causes of possible fluctuation in expenses or revenue, loss control and finance tools, and then implementation of the core steps, monitoring and finally, review.

When a company is identifying and evaluating a risk, possible losses are classified by how the loss occurred, whether through an employee action, external environmental loss, or a multitude of other possibilities. When the loss has been properly identified it is necessary to discover the severity of the impact that the loss has on the cash flow of the company. The next step is to determine -what is the best way to prevent the risk from happening. By choosing not to engage in specific activities, some losses ...