Risk management can be defined as the “process which aims to help organizations understand, evaluate and take action on all their risks with a view to increasing the probability of success and reducing the likelihood of failure” (Hopkin, 2010, p. 37). This is the definition made by the Institute of Risk Management (IRM), which also published ‘A Risk Management Standard’ (IRM, 2002), a guide that lays out a framework for managing risks. This report will critically analyse and evaluate this approach, also known as Risk Listing. This paper will initially examine the limitations of this risk management practice by explaining why these disadvantages could lead to a negative impact on the organization involved in the process. The second part will focus on recommendations that could improve such practice. The ideas outlined in the text will be supported by relevant concepts of risk management and will be academically justified with appropriate references.
Limitations of Risk Listing
Although Risk Listing might be seen as a simple and effective practice in terms of the structure of the phases, it mainly refers to small risks, which are analysed and evaluated one by one. As a consequence, a system that tries to find solutions for one risk at a time, may not allow to value responses that would apply to more than one risk. This mechanism also does not guarantee to find or manage the possible connections between the risks in an appropriate manner (Crouhy, Galai and Mark, 2014). Another factor caused by the tendency to manage risks separately is the incurring of excessive costs: in fact, the individual management of each risk could induce inefficiency due to higher costs and poor results. This factor highlights the matter that similar risks with identical outcomes would not be managed together, which can lead to negative effects. The clear separation of tasks which is created does not consider the interrelations existing between some risks, and this implies a lack of coordination between the various functions (Crouhy, Galai and Mark, 2014). Read more: https://bit.ly/3ne20pV