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Managing risks
Date: 2005/02/18 05:47 By: David Status: Moderator  
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Posts: 2
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Managers have to face many kind of risks in the every day companies life. If financial tools are used to avoid financial risk, others risks are not so easily avoid. The idea of risk has evolved and increased in the last decades. If insurance was able to cover a majority of risk in the seventies, nowadays managers have to face international risk, crime or even terrorism. Managers error canít be excluded too, especially if we know that they are not prepared for all range of risk.
If risky situations increase they become also more expensive.
If we know that, we can advice managers to identify all risky situations they can face and prepare the right retort. Is it so simplistic ? The point is, how managers can identify risk ?
Do they have skill to define and face it ?
Furthermore, risky situations still potential wouldnít certainly appear and itís why managers are not necessarily involved.
Risk management was developed in America in bank industry to cover market exposure. Risk management gives importance to internal control and technical tools.
Can the risk management completely avoid management error or any kind of risk ? Certainly not.
A few years ago, Enron gave the perfect example of economic disaster occurring in a company well equipped in risk management.
So can we give credit to risk management ?
Since these disasters have happened, time comes to think about a new risk management. Because disaster can be the reason of disappearance of companies and shareholders care about continuity of activity, risk management canít be delegated but must be included in the global management of companies.

A good advance planning made Lehman Brothers more resilient to the September 11th attacks than other competitors less damaged.
Most of the companies, wherever they are in the world, are now conscious of the terrorism threat. But infectious diseases also represent a risk that must be faced now.
Scenario planning which had been abandoned in the 1990ís is now coming back as geopolitical instability is increasing.
At Microsoft, value at risk is calculated in various scenarios.
Nowadays, companies canít simply rely on insurance providers, and have to monitor themselves all kinds of risks.
Governments and the auditing industry are drawing up rules and promoting internal behaviour. That guidelines help companies being aware of all their risks, their likelihood and their cost. Some risks can then arise from the shadow.
That management must be seriously done to be efficient.
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