Risk Management Is Not Avoiding Or Eliminating Risk Essay

As time has shown, financial institutions undertake an abundance of uncertainty causing unpredictable risk consequences. As a result, executives instill risk management programs to assist in managing the organizations risks so they align with the company’s goals. Commonly sought goals include legal and regulatory compliance, tolerable uncertainty, survival, business continuity, earnings stability, profitability and growth, social responsibility and economy of risk management operations. Through the implementations of goal oriented programs, an organization can effectively minimize risk uncertainty. All organizations including financial institutions encounter risks from each risk

For the small community bank, every action involves an amount of risk. A risk management program, which identifies, analyzes, treats, and monitors risks, is necessary for the bank’s operations. Mitigation strategies are implemented against potential losses or a bank failure. The executive in charge of developing and integrating the program is the Chief Risk Officer (CRO). The risk management program for the community bank addresses ten risks associated with Enterprise Risk Management (ERM) or traditional risk management processes, while attaining risk management goals.

Risk refers to a likelihood, probability, a chance that a loss may occur in a given organization. Most of the times, there is a high risk when there is vulnerability. In this case, vulnerability refers to a weakness that the organization has. Risk assessment refers to the process of identification of potential hazards and proper analysis of the expected losses if those hazards occur (Homeland Security, n.d.). Risk assessment as a way of profiling risk according to impact to the organization. Some organizations have business impact analysis exercises geared towards determination of potential hazards based risk assessment approaches. Organizations’ risk differ depending on the size and the type of business they are doing. The disparity in organizations’ risk call for different adaptation of risk assessment approaches. Even with the disparities of the businesses, proper risk management not only ranks the risks according to the seriousness but also identifies the best methods to control risks in an organization.

RBC engages a strong risk culture, with an understanding of risk awareness and responsibility. They use several methods to manage and alleviate their vulnerability to different types of risk. This bank’s risk-management process includes in-depth risk measurement, risk control, and risk governance, with setting the right risk culture at the top with their Board of Directors through their “Three Lines of Defence Model ,” (See Exhibit 4).

Each flowchart step is placed in the “Lane” for the group responsible for completing the task (Marketing, Sales, HR, etc.).

According to IRM-AIRMIC-ALARM (2002), risk management actually defines every organisational strategic management; it comprises the process which identifies and treats the internal and external risks and adds sustainable value to the organisation and its stakeholders by decreasing the probability of not achieving the organisation’s overall objectives. The specific institutes suggest that risk management lies in the strategic, tactical and operational levels, and its embodiment in all tasks and roles is required; it is a consistent manner for an organisations’ operation, which leads to effective decision making, efficient allocation and protection of the organisational assets, and enrichment of the organisational

The first goal is tolerable uncertainty. According to Elliott (2012), keeping management assured whatever happens will be within anticipated bounds and effectively addressed. The developed risk management program has analyzed the risks for the community bank and aligned safeguards with the bank’s objectives. Accounting for the risk appetite of senior management guides the CRO. Through ERM and traditional risk management, risk financing techniques and the purchase of insurance mitigate the identified risks.

Risk management is a critical issue as all institutions, financial and non-financial, are laden with huge degree of uncertainty. The role of risk management is to help a firm assess the risks that it faces, communicate these risks to the managers of the firm who make decisions concerning risks and manages those risks to ensure that the firm only bears the risks that are within its risk appetite and tolerance. Some risk analysts employ the use of statistical distributions and the correlation among them to aid corporate decision makers on matters concerning risk. However, since the financial crisis, there has been almost a general agreement among financial regulators that flaws in risk management played a major role in worsening the crisis. According to an investigation done by Dr. Simon Ashby in an article, “The 2007/09 Financial Crisis: Learning the risk management lessons”, interviews conducted with about 20 senior risk management officials’ show a common theme among their responses. Majority of them believe that some financial institutions did not properly implement risk management that were aligned with accepted good practices and too much trust was placed in

Risk management goes hand in hand with preventing or reducing the risks from theft, fraud and embezzlement. Lastly, financial managers should apply control when it comes to intensifying internal financial controls. This is followed by the senior financial management staff and internal auditors (Ingait).

The risk management approach of the company is proactive and focuses on identification and effective management of risk through the assistance of the risk management committee of the board with the purpose of creating long term shareholder value. Risk specific management activities are carried out in core areas including operational risk, strategic risk, and reporting and compliance risk. Besides, the board oversees and approves risk management strategies and policies, internal compliance and internal control (Harvey Norman Holding Limited, 2015).

develop a methodology for quantifying risks, or should each situation be addressed individually? Can we have both a quantitative and qualitative risk evaluation system in place at the same time?

J.P. Morgan Private Bank was one of the most successful banking services globally. It offered high-end financial products and services with professional risk management team. In financial crisis, the Private Bank successfully survived with relatively great performance. This paper would exposit the key to their success of risk management by answering six questions.

Risk management is the term applied to a logical and systematic method of establishing the context, identifying, analyzing, evaluating, treating, monitoring and communicating risks associated with any activity, function or process in a way that will enable organizations to minimize losses and maximize opportunities. (Lecture notes)Risk Management is also described as 'all the things you need to do to make the future sufficiently certain'. (The NZ Society for Risk Management, 2001)

Risk Management: Without understanding customer profile and background, bank fails to assess risk/benefit of offering product/service to customers. This leads to non-performing assets without proper recovery plan.

Risk management is an activity which integrates recognition of risk, risk assessment, developing strategies to manage it, and mitigation of risk using managerial resources. Some traditional risk managements are focused on risks stemming from physical or legal causes (e.g. natural disasters or fires, accidents, death). Financial risk management, on the other hand, focuses on risks that can be managed using traded financial instruments. Objective of risk management is