Risks in an Organization and Ability to Manage Them

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Table of Contents

Introduction
Discussion
Conclusion
Reference List

Introduction

In every organisation, there are some key management decisions about management, which play a pivotal role in determining the performance of an organization. Managers have the ability to control these variables in their attempt to optimize on various things which affects an organization. One of these practices is the risk management. In every business, the managers often find themselves faced with a wide range of risks. The success of an organization is determined by its ability to manage these risks.

Discussion

Poor risk management can lead to a complete death of an organization (Ferreira, not dated). The long term performance of an organization is significantly determined by the companys ability to detect and act upon any threatening risk. Risks can come from different angles. They can come from within an organization (internal risks) as well as outside an organization (external risks) (Sekhar, 2005).

In the current business world, risk management has become more important than ever. The market has become highly competitive and, therefore, it requires every organization to have the ability to detect the exposure to risks as well as the best methods to solve particular problems. Ability to manage risks has a significant impact on the competitive advantage.

In many cases, an organization may be forced to take a risk as a way of advancing its efforts to realize its goals or visions. In other words, leaders in an organization may take steps of which they are not sure of their possible consequences. In such cases, an organization takes a risk. The action taken may help an organization in realizing profits and it may also dip it into losses (Ferreira, not dated). It, therefore, needs risk management skills to anticipate and prepare for such risks.

In business, there are different types of risks. One of the main types of risk in business is venturing into a new market. In order to expand its market network, an organization needs to invest extra amount of money. However, this poses a risk because the new market may fail.

The managers are not sure that their product will succeed in the new market. Another type of risk is financial risk. In some cases, an organization may be forced to take a loan in order to invest in a certain field. Such sources of capital carry risks because the organization must pay with interests. The risk rises from the fact that an organization is not always sure whether the new venture will end up to profits or losses. However, the risk managers should make the necessary assessment in the new market in order to minimize the impacts of risks.

The process of risk management plays a pivotal role in overall performance of an organization. One of the most important steps in risk management is identification of the problem. This directs the risk managers on how to handle a certain problem. According to Bunyan (2006), it is necessary to consider whether a certain solution will solve the problem partially or completely. In order to have a successful risk management process, it is necessary to allocate adequate funding to the risk management program.

Conclusion

In conclusion, this discussion has clearly shown that risk management is an important practice in every organization. Risk management prepares an organization in early risk detection which reduces the impact of such risks to an organization. Risks can be very dangerous to the overall performance of an organization if not properly handled.

It is, therefore, advisable for every organization to take the necessary measures in order to improve their risk management processes. The risk managers are obliged with the responsibilities of detecting risks early enough and then acting accordingly to compress these risks.

Reference List

Bunyan, N. (2006). Managing Risk and Business Security. Web.

Ferreira, G. (n.d.). Best practices for Risk Management. Web.

Sekhar, (2005). Management Control Systems: Text and Cases. New Delhi: Tata McGraw-Hill Education.

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Risks in an Organization and Ability to Manage Them

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