The paper "Risks That Arise in Business Operations " is a great example of management coursework. Risk management is a broad term which includes identification of a problem then assessing the underlying reasons and after that prioritization of the associated risks. Once all risks have been outlined it is time to manage and make use of best resources available for minimizing the said problem. However, these activities are accompanied by monitoring and control of the probability of occurrence of an uncertain event. Successful project managers realize that risk management is an important strategy for analyzing, avoiding and controlling unacceptable risks.
By planning for unexpected events, a company can deal with them in a systematic way, in case such events arise. The uncertainties of the unexpected events require the need for more advance and accurate data and its analysis to make decisions which curtail the negative effects they can arise from such situations. It is now universally realized that risks in the business sector take place now more often as the global markets are interconnected. This has increased the pressure on risks managers. Operational Risk has recently become one of the most widely occurring risks due to the complications in the global market and the complexity in transactions (Crouhy, Galai, & Mark, 2000). Risks that arise in business operations due to human error are known as operational risks.
Operational risks have become a strong threat to the performance of any company. They change from industry to industry. Operational Risks require proper consideration when potential investment decisions of a company are made. It has been observed that companies which have lower human interaction suffer from a lower rate of operational risks.
Operational risks have become an important risk component of the management process in the banking sector and in the insurance sector of an economy. European Union legislation requires that institutions sufficiently manage and lessen the operational risk. Operational risks stem from inadequate or unsuccessful internal processes, office members and staff; systems or from external events that cannot be controlled (Das, 2006). A broad range of risk issues in the industry Following are some of the risks that occur in an industry and have affected the performance of the organizations. Systemic Risks This risk deals with the entire market and not just a particular stock.
It cannot be mitigated through diversification. A correct asset allocation strategy can help. Compliance risks Compliance risks are the risks that are faced by the legal and regulatory system in the industry. It deals with control and the profession. Strategic Risks Strategic Risks are related to Economic, industry, Strategic Transaction, Social factors, Technological, Political and Organizational systems (Hassett & Stewart, 2006). Operational Risks Operational Risks are faced by environmental factors, financial factors, continuation in business, innovation, human resource, health and safety and the internal regulations for operations. Importance of the risk issues Risk issues are important for every organization to keep a vigilant observation of the different components that help in the better performance of an organization.
Risk issues require risk management which is critical for the success of a project. Risk management must be done during the planning stages so that in case of an occurrence of a risk issue, regulatory policy should be present. In many cases, the regulatory policy is implemented even before the occurrence of the risk considering that the probability of the risk is high.
Risk issues are important as a cautionary step in a project. Managing risk issues minimize the impact of project threats and seize the opportunity that occurs in such a context. Due to risk issues, risk management has become an essential part of the project (Christoffersen, 2011).
1. Christoffersen, P. F., 2011. Elements of Financial Risk Management. s.l.:Academic Press.
2. Crouhy, M., Galai, D. & Mark, R., 2000. Risk Management. s.l.:McGraw Hill Professional.
3. Das, S., 2006. Risk Management: The Swaps & Financial Derivatives Library. s.l.:John Wiley & Sons.
4. Epstein, M. J. & Buhovac, A. R., 2006. The Reporting of Organzational Risks for internal and external decision making. Society of Management Accountants of Canada.
5. Frenkel, M., Hommel, U., Dufey, G. & Rudolf, M., 2005. Risk Management: Challenge and Opportunity. s.l.:Springer Science & Business Media.
6. Hassett, M. J. & Stewart, D., 2006. Probability for Risk Management. s.l.:ACTEX Publications.
7. Mainell, M., 2002. Industrial strengths: operational risk andbanks. [Online]
Available at: http://www.zyen.com/Articles/External%20publications/Industrial%20Strengths%20Operational%20Risk%20and%20Banks.pdf
[Accessed 13 November 2014].
8. Mainell, M., 2002. Operational risk and bank. Industrial Strength.
9. Marchetti, A. M., 2011. Enterprise Risk Management Best Practices: From Assessment to Ongoing Compliance. s.l.:John Wiley & Sons.
10. Regester, M. & Larkin, J., 2008. Risk Issues and Crisis Management in Public Relations: A Casebook of Best Practice. s.l.:Kogan Page Publishers.