Jun 25, 2018 in Research

Risk Management Plan


Discussions of risk management almost always center more on risk than management. How to measure value at risk is often regarded as more important to risk management, for example, than how conflicts between shareholders, creditors, and managers contribute to the need for risk management and inhibit its effective implementation. In business school programs as in actual practice, risk managers are more often viewed as “finance nerds” than general managers. In corporations, risk managers are usually perceived to be a cost center whose jobs senior managers and directors only sometimes understand and very rarely utilize to productive ends. Risk management, in short, is traditionally viewed as the necessary evil by which firms try to quantify—and, if possible, avoid—financial Armageddon. To make the risk manager's image problem worse, financial risk management is regarded as a relatively new and fad-like phenomenon. Before the great derivatives disasters of the 1990s—Barings, Procter & Gamble, Metallgesellschaft, Orange County, and so forth—risk management was not seen as much more than insurance. Or risk management might have been seen by a trader as, say, how to leg out of one side of a straddle without getting too exposed on the other side. But in general, risk management was not seen as a discipline or function by its own right until after a number of mainstream, household corporate giants lost big money on so-called risky derivatives. But to view risk management as novel, independent from, or even secondary to general management is to miss the whole point. If anything, risk management is first and foremost about sound general management. In that sense, risk management is an organizational function and business process is hardly new. Principles of sound general management have been around quite a while, and applications of those principles to risk management are not a particularly recent phenomenon—just ask the insurance industry.

It is important to gain a comprehensive explanation for how a sound risk management process fits into a sound general management framework, whether it be at a bank, a pharmaceutical company, or a pension plan. Risk management as a process is rationalized, investigated, and demystified in terms of the new business strategies and tactics it engenders as well as the old strategies and tactics it impacts. A picture of risk management is painted that strives to eliminate thinking of risk management as a separate field. More than anything, a good understanding of risk management requires not an understanding of calculus or value at risk, but rather a solid grasp of the basic tenets of corporate finance and strategy. Nevertheless, without a solid understanding of why risk management makes sense, the design of a risk management strategy and the implementation of that strategy can easily fall flat. At best, a failure to connect explanations for why managing risk can add shareholder value with the design of a risk management program will leave some unexploited efficiency gains and opportunities on the table. But at worst, the disconnect between corporate finance and risk management can lead a firm to implement the wrong risk management program altogether, sometimes leaving it exposed to even greater risks than if it had done nothing.


It has been argued that judgments about risk can profit from an integrated approach that draws upon the knowledge and understanding of lay audiences in the deliberation of questions of  policy and value. But the notion that all knowledge is ultimately socially constructed does not address the rhetorical problems that policymakers face when they attempt to predict (and prevent) disaster: What counts as persuasive knowledge in the context of risk? Are there rhetorical principles that can guide decision makers as they attempt to document rapidly changing conditions in hazardous environments? How do written and oral communication practices affect the negotiation and construction of knowledge in risky environments?

It can be said that in order to ensure that the risks that can be faced are all addressed, it is important to apply scenario-driven planning. Scenario-driven planning is a new management technology. Often, it is the technology behind the superior performance of world-class firms. Their managers use scenarios to articulate their mental models about the future and thereby make better decisions. Their outstanding performance is the result of their continuous effort to improve their strategy design, which scenario-driven planning enhances through a tireless renewal of organizational mind-sets. Computing scenarios can help a management team produce insights much richer than those expected from a single-point forecast (Culp, 2001).

With the upcoming 2010 Winter Olympics it has become more important for the committee and the event's managers to provide means and ways in ensuring that the event will surely be a success  and that problems will not get in the way. This is particularly true in all events whether it be a wedding, a sports event or even a school activity. Every little details should be kept in place and that everything should be perfect in any angle. But how can it be achieved? Especially in huge events wherein people from different countries, nations and worlds will come. It will be very difficult to manage a certain event where dignitaries are expected to be present. It will be very hard to manage a great deal of people for the staffs and the participants. But all these things can be set aside as well through the application of the risk management and control of loss programs.

In order to mitigate if not totally eradicate the problems that might arise especially in terms of managing the event, it has become more important to create various committee. For one, a safety committee must be essentially established.

The safety committee will act as a team that will ensure that the foods are well served and that it will not cause any food poisoning. One of the major problems in big events is the lack of proper health sanitation that results to food poisoning. Since this situation can sometimes occur even if it is not being expected, it can be mitigated or eradicated by establishing a team that will supervise the serving and the preparation of the food. In addition, the team will secure the safety of each participants and spectators of the event (Doherty, 2000). The members will ensure that there will be no accidents and that the safety and the health of every person in the event will be kept in a high maintenance. Safety program functions will be delegated to each member on a rotational basis and doing supervisory functions in all angles of the event.

Another aspect of the mitigation of risk is the establishment of the medical team. This is especially important in a sport event wherein the participants or the players might encounter accidents. The first-aid or the medical team will not just ensure that it has the necessary first aid equipment but rather will designate an appropriate physician that will supervise the team. Members of the team should be knowledgeable in giving first aid treatment such as CPR and other techniques in giving medical assistance not just to the participants but to all the people that will attend the event. The potential risk and degree of the accidents in sports events and other occasions can be hard to imagine and because of that, it will be very important to decide what to do with the risks that might be encountered later on. It is better to be prepared than be caught off guard in the process and will not be able to know what to do to address the problem.

If these problems are arranged (1) to show the significance of the organizing and administrative, or control, activities of the modern responsible manager, and (2) to indicate appropriate fields of training, the diagram on the opposite page (which disregards much over- lapping and interacting) results. It sets forth the present hypothesis of the mitigation of risks. But then again, even if there are ways and programs conducted in order to ensure that risks are mitigated, it cannot be denied that the costs will be high and it will take a huge decision to take the risks. Risk may be defined as uncertainty in regard to cost, loss, or damage. In this definition, emphasis is on the word uncertainty. Where destruction or loss of capital is certain in connection with a business process, it can be charged up in advance as a cost. It is not a risk (Hood, 1996). When the destruction or loss is uncertain, it may be dealt with in accordance with judgments of probability, and presents a problem in risk. In this chapter our task is to make a preliminary survey of the forms and extent of risk involved in present-day economic life.

It is a common statement that risk is universal. As one author puts it: The owner of wealth must, if he is rational, invest it in some productive enterprise, unless, under the circumstances, he decides to consume it; and, wherever it is invested, there will be some risk that part of it will be lost by the dishonesty of others, the deterioration in value of the property in which it is embodied, or in change of value of the standard of deferred payment. If he thinks to escape by hoarding it in the shape of specie, robbery is to be feared, to say nothing of the opportunities of gain which are given up. If he decides to consume the wealth at once, he runs the risk of coming to poverty (Krimsky, 1992).


While our understanding of the nature and dimensions of risk has grown astronomically, the definition of risk remains quite simple: the possibility of loss or harm. An activity, condition, or substance is risky if it could result in your losing something — life, money, morality, beliefs, health — or harm a life or material object. “Risk” states a recent report on risk analysis by the National Academy of Sciences, "is a combination of the probability of an event — usually an adverse event — and the nature and severity of the event." Of course, dealing with risks and hazards is nothing new
in human society. What's changed of late — to a revolutionary extent — is the way in which scientists can now understand, quantify, and identify risks. The birth of the multidisciplinary science of risk analysis in the 1970s has fostered journals, university departments, numerous careers, and a growing pile of influential papers. But the foundation of this new science in fact lies in a remarkable revolution in Western civilization that occurred four centuries ago. In essence, although on a limited scale at first, probability theory enabled its practitioners to quantify the odds of two different events occurring and then compare them. The effect of this simple but remarkable work was like letting a powerful genie out of its bottle (Dubofsky, 2003). The insights gained by science and technology as a result, along with the new tools developed for analyzing risk decisions, soon radically changed the way humans thought about uncertainty and regarded the future. The theory bore directly on how people make decisions and, consequently, how they live their lives, even among people who don't know the first thing about statistics. Both as individuals and as a society, Americans and America still wrestle with the consequences of Pascal's work every day of their lives.

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