Risk Management

Introduction Internal and external environments of an organization pose a wide range of risks to an organization and managers should establish strategies to manage risks for the long-term survival. Risk management strategies are enhanced by the culture of the organization and this can be maintained by inculcating a culture of good values, believes, norms and attitudes.Advertising We will write a custom essay sample on Risk Management specifically for you for only $16.05 $11/page Learn More Changes in the global markets today create a huge risk to organizations and this creates the need to have mechanisms to solve organizational problems in a professional manner. Thus, risk management is a crucial aspect of an organization and proper strategies need to be established to ensure the survival of organizations in the turbulent market environments (Jafari, Rezaeenour, Mazdeh, Hooshmandi, 2011). Therefore, risk management entails setting goals and objectives a nd ensuring that they are achieved in the most effective manner, managing change that is brought about by introduction of new strategies, managing cultural and technological diversity among other tasks. Risk management covers a wide range of activities and aims at establishing better strategies of promoting the success of an organization. Enterprise wide risk management (EWRM) Enterprise wide risk management involves managing risks and seizing opportunities which help an organization to achieve its objectives. Managing risks as opportunities come is very important in maintaining the success of the organization. Creating value to the shareholders capital is the major bestowed upon the managers of an organization. This can be achieved by identifying opportunities available in the business environment and seizing them actively to ensure the interest of shareholders is protected. Therefore, EWRM is defined as an approach used to manage enterprises by controlling risks (Gupta, 2011). It is important to note that organizations are founded on goals and it is the achievement of these goals that differentiates successful organizations from others. There are various risks associated with achieving goals and the management requires to develop strategies to reduce the effect or evaluate the impact such risks have on the organization. Organizations set goals to be achieved and these goals can only be achieved by proper planning of all resources. Risks are encountered in every situation in an organization and it is important to put clear strategies to deal with risks as they occur to avoid losses (Hepworth, Rooney Rooney, 2009).Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Therefore, it is evident that EWRM is an important aspect that determines how organization succeeds in turbulent market conditions. Managers use risk management as a benchmark to measure the achievement of an organization. An organization that is able to manage all the risk elements successfully acquires better position in the market. Most successful organizations have ventured in risky businesses and this has created a lot of wealth to the shareholders. Operating in high risk activities requires establishing a strong risk management system to ensure that the organization can not make a lot of losses in case the event of risks occurring (Mbuya, n.d.). GRC and its relationship with EWRM Governance, risk and compliance are management tools that comprise of three aspects. First, governance which refers to the process by which the top management team apply to control, plan, organize and direct the resources of an organization to achieve the goals which have been set by the shareholders. It involves making decisions by the top management by using the appropriate information. Secondly, risk management involves the identification, analysis and response to the risks affecting an organization. T o manage risks an organization can control, avoid, accept, or transfer the risks to other parties. Lastly, compliance deals with conforming to all requirements stipulated by the concerned stakeholders (Mohapatra, n.d.). According to Wilson and Dobson (2008) governance, risk and compliance is related to EWRM in that the management puts measures to regulate the activities of the organization to ensure that all rules and regulations are adhered to. By complying with the rules and regulations of the organization, the management ensures that it avoids the risks of penalties related to legal systems of a country. The management evaluates the costs related to the implementation of various strategies and this helps solve some problems that may affect the smooth operation of an organization. Compliance enhances the control of risks associated with the implementation of decisions made by the management of an organization (Mather, Kumaraswamy Latif, 2009). Therefore, we find out that there is a close relationship between GRC and EWRM because the two interact with each other. However, there are few differences between GRC and EWRM in that GRC deals with how organizations are managed and how the organization benefits when all rules and regulations are adhered to by all stakeholders.Advertising We will write a custom essay sample on Risk Management specifically for you for only $16.05 $11/page Learn More It also explains the relationship between the internal and external environmental elements and how they interact with each other. On the other hand, EWRM is based on risk management at the enterprise level and provides little interaction between the internal and external environments (Mather, Kumaraswamy Latif, 2009). Opinion about above statement a fair comment on the state of play today Enterprise wide risk management (EWRM) as an assurance tool is increasingly being mandated; indeed it is embedded as a concept in ISO31000:2009. This statem ent is a fair comment on the state of play today. Many organizations have realized the importance of managing risks and this has been facilitated by the intensifying number of risks in the market environments today. To establish better strategy for improving the competitiveness of an organization can only be made possible by managing all the risks that may be associated with the implementation of such strategies (Loras, 2010). Threats and responses to be offered There are various threats that managers encounter when maintaining values in an organization. In competitive environment organizations face threats which may hinder accomplishment of the stipulated values. Some of these threats may be cause by changes in internal and external environmental factors such macro and micro economic variables, legal factors, technological changes, political environments among others (Champoux, 2010). The response to these threats determines the success of an organization. The management responds b y studying the changes in the market conditions as well as other factors that may affect the activities of the organization. Some examples of the responses that can be offered to these threats are change management, making better decisions, establishing stronger strategies, collaborating with consultants and other measures (Klein, 2011).Advertising Looking for essay on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More Change management is an important aspect that managers need to learn when dealing with threats and responses. Moran and Brightman (2001, pg 111) have defined change management as â€Å"the process of continually renewing an organization’s direction, structure, and capabilities to serve the ever-changing needs of external and internal customers.† Change is the opening through which people or organization focus the future by bringing new systems which create success. Change can be introduced by an individual person or organization or it can be happen by itself. Change brings opportunities for growth and improvement. The management of an organization should become fast in introducing and implementing change since the world is changing at an alarming speed. Jennings and Haughton (2002) explain that the need for change has been caused by â€Å"revolutionary technologies, consolidation, well-funded new competition, unpredictable customers, and a quickening in the pace of ch ange hurled unfamiliar conditions at management.† (P. 212). Change management focuses on developing future structures of a business to improve the performance as well as introduce new technologies which improve the performance of the organization. The path towards establishing future structures should be well monitored to create a smooth transition for the organization to achieve the desired changes as well as manage risks. Crisis within the organization create the need for organizational change and the management should be prepared to handle all changes that might be required by the organization. The internal and external business environments are changing at an alarming rate and change management is an essential tool for capturing new developments being introduced. Competition in the global markets has increased and this is forcing managers to introduce innovation in the management of the systems within an organization in order to catch up with the changes (Luecke, 2003). Ma ny changes introduced within an organization fail due to poor preparedness as well as management of the entire process. The lack of appropriate frameworks to support the implementation and management of change within an organization are the main causes of failure by many changes introduced by the management (Burnes, 2004). The nature of organizational change has been assumed for a long period of time by managers and contemporary studies have indicated that strict measures should be introduced to cater for the gap between the success and failure of the changes being introduced by an organization. According to Edmonstone (1995) â€Å"many of the change processes over the last 25 years have been subject to fundamental flaws, preventing the successful management of change† (p. 16). Contemporary studies have identified that the pace of change management has increase in the recent years and managers are becoming more responsive to the changes in the environment (Burnes, 2004). Ther e is no organization or industry is immune from change since change is caused by many internal and external factors. The introduction, implementation and monitoring of change requires the collaboration of all stakeholders to an organization. Change cannot be achieved by an individual department, or sector. The management should respond quickly to internal and external changes required by the organization. Delays in response can retard the achievement of appropriate change. Since new technologies are being introduced in the global markets each day, delay in establishing change may result into the organization adopting old systems which are not beneficial. Adequate research should be done into the recent changes in the market. There are no universally acceptable processes of creating change in an organization. The management should apply the best structures relevant to the organization (Burnes, 2004). Inculcating culture in EWRM and/ or GRC According to Kotter and Heskett (1992) cultu re refers to the beliefs, attitudes, values and norms that a given people have. The organizational culture is defined by the stakeholders and this is reflected in the nature of activities the management sets. The culture of an organization is inculcated in the GRC by creating systems of compliance. Culture establishes the norms to be observed by all stakeholders and this creates the basis of compliance. Culture explains the extent to which the management can take risks while managing the resources of an organization (Klein, 2011). There are organizations which are risk-averse while others are encourage taking risks as the basis of operation. This differentiates the decisions to be made by the management during the operation and implementation of the strategies (Burnaby Hass, 2009). To achieve appropriate governance the management requires establishing better strategies of promoting the cultural morals of an organization. Cultural morals have become a major concern in the business w orld today because organizations are operating in multicultural environments. Working with people from different cultures requires understanding the cultures of each person in the organization Global human resource management involves dealing with people from different cultures and different backgrounds. There are several advantages and disadvantages of operating global human resource management. Some companies have failed while others have acquired great success after extending their operations across the borders. Proper strategies are required in the management of employees with diversified cultures. The political, legal and social environments in the global labor markets are different and the management should be very accurate in establishing the appropriate strategies which match the particular needs of the different employees. With the increase in globalization many people are seeking employment across the borders of their domestic markets. However, organizations dealing in the international scene face some challenges when relocating employees from one country to another. There are several barriers which hinder managers of multinational companies from relocating their employees from one country to another. These barriers relate to the physical conditions, legal aspects, economics, and cultural barriers (Golembiewski, 1995). Complexity in the diverse cultures makes is difficult to operate in many countries. Several companies have failed in their strategies to operate in the global scene due to due to poor integration of the ingredients required in multinational human resources management. Global human resource management is a strategy that is gaining a lot of importance especially after the spirit of globalization started. Several companies have improved their performance after establishing proper strategies to manage their employees while others have failed due to poor integration of the required aspects of global human resources management. The need to u nderstand the cultural differences, the diversity in economic, legal and political environments is very important when dealing with global human resources management (Burnaby Hass, 2009). The culture of an organization dictates the shape taken by the management goals and objectives. The success or failure of organizational change is determined to a great extent by the culture in the organization Cultural change is required for the achievement of successful change management strategies. The globalization of many organizations has created a scenario where multinational organizations are operating in diverse cultures where many people are involved. The integration of each cultural aspect into the processes of the organizational change is essential for the success of the organization. The global business requires applying the best strategies to achieve a competitive edge. Many global organizations have failed to venture into some countries due to poor analysis of cultural aspects of th e people it is involved in. the management of change is a very important aspect in achieving success in accomplishing global goals. The management of an organization must analyze the cultural needs of all consumer groups. This will enable the management to match the cultural needs of the various consumers into the products being manufactured by the organization. In addition, the employees of the organization need to understand the cultural aspects of the organization in order to establish goals which are achievable and which will create success to the organization. Both the internal and external environmental factors should be well analyzed when integrating a culture that will create successful change management strategies (Schein, 1992). Changing culture is a systematic process which requires proper strategies to ensure all stakeholders internalize the required changes. This process is affected by factors such as the complexity, ambiguity and powers the cultural aspects of the orga nization. The main architects of an organizational culture are the top management individuals.The culture of an organization is developed by the people working there as well as all other internal and external stakeholders (Schein, 1992). Is it simply too expensive for value? It is not too expensive to maintain values in an organization because there are more benefits accrued from operating in an ethical manner. Values provide an organization with the guidelines to be applied in the implementation of strategies. When an organization conducts business unethically there are many costs incurred and these can only be avoided by applying the best values possible. Maintaining values improves the public image of an organization and this makes an organization achieve a competitive edge (Thompson Martin, 2005). Organizations which fail to establish a good system of values they end up incurring many losses which could have been avoided. These costs may include loss of customer trust, legal ac tion, bad corporate image and others. The cost of failing to maintain values in an organization is too high not only in the short run but also in the long run. Organizations which focus on existing in the market for a longer period of time use strategies which promote a good image which will attract more customers, they maintain legal ethics and other activities which improve the position of the company in the market (Cunningham, 2001). Conclusion Risk management is an important process that managers should maintain in an organization. It is inevitable to have risks and managers should have better strategies to deal with risks. The long-term survival of an organization depends on the ability to manage risks. The intensifying competition in the global markets has forced managers to focus on maintaining a strong risks management program by establishing values. Complying with the values and cultural aspects of an organization is important in achieving the goals and objectives of an org anization. The culture of an organization determines its success in the market environment. It is a reflection of the beliefs and attitudes that people have towards the organizational systems. Culture is developed and shaped by the stakeholders of the organization. Change management is very important to an organization and managers should possess the required skills of carrying out this process. Therefore, risks management is an important activity for organization in the modern market environment and all managers should embrace it for the long-term survival of their businesses. List of bibliography Burnaby, P. and Hass, S. (2009). Ten steps to enterprise-wide risk management. Corporate Governance, 9(5). p. 539-550. Burnes, B. (2004) Managing Change: A Strategic Approach to Organizational Dynamics, 4th Edn (Harlow: Prentice Hall) Champoux, J. (2010). Organizational behavior: Integrating individuals, Groups, and organizations. New York: NY, Taylor Francis. Cunningham, B. J. (2001). R esearching organizational values and beliefs: the Echo approach. New York: NY, Greenwood Publishing Group. Edmonstone, J. (1995) ‘managing change: an emerging consensus’, Health Manpower Management, 21(1), pp. 16–19. Golembiewski, R. T. (1995). Managing diversity in organizations. Alabama, University of Alabama Press. Gupta, P. K. (2011). Risk management in Indian companies: EWRM concerns and issues. The Journal of Risk Finance, 12(2). P. 121-139. Jafari, M., Rezaeenour, J., Mazdeh, M. and Hooshmandi, A. (2011). Development and evaluation of a knowledge risk management model for project-based organizations. Management decision, 49(3). P. 309-329. Jennings, J. and L.Haughton. (April 16, 2002). It’s not the BIG and eats the SMALL†¦ it’s the FAST that eats the SLOW. Harper Paperbacks; 1st edition. 288 pages. ISBN-10: 0066620546 ISBN-13: 978-0066620541 Klein, A. (2011). Corporate culture: its value as a resource for competitive advantage. Journal o f Business Strategy, 32(2). p. 21-28. Kotter, J. P. and Heskett, J. L. (1992). Corporate culture and performance. New York, Simon and Schuster. Loras,J. (2010). Book Review : Strategic Risk Management Practice: How to Deal Effectively with Major Corporate Exposures. Management Decision, 49(1). p. 167-170. Luecke, R. (2003) Managing Change and Transition (Boston, MA: Harvard Business School Press). Mather, T., Kumaraswamy, S. Latif, S. (2009). Cloud Security and Privacy: An Enterprise Perspective on Risks and Compliance. New Jersey: NJ, O’Reilly Media, Inc. Mbuya, J. C. (n.d.). Risk management strategy. South Africa, Dr John Chibaya Mbuya. Mohapatra, (n.d.). Business Process Automation. New Delhi, PHI Learning Pvt Ltd. Moran, J. W. and Brightman, B. K. (2001). ‘Leading organizational change’, Career Development International, 6(2), pp. 111–118. Schein, Edgar. (1992). Organizational Culture and Leadership, Second Edition. San Francisco: Jossey-Bass Thompson , J. L. and Martin, F. (2005). Strategic management: awareness and change. London, Cengage Learning EMEA. Wilson, S. B. and Dobson, M. S. (2008). Goal setting: how to create an action plan and achieve your goals. New Jersey: NJ, AMACOM Div American Mgmt Assn. This essay on Risk Management was written and submitted by user Marc Shelton to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.