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What Is Risk Management & Why Is It Important?

• 24 Oct 2023

Businesses can’t operate without risk. Economic, technological, environmental, and competitive factors introduce obstacles that companies must not only manage but overcome.

According to PwC’s Global Risk Survey , organizations that embrace strategic risk management are five times more likely to deliver stakeholder confidence and better business outcomes and two times more likely to expect faster revenue growth.

If you want to enhance your job performance and identify and mitigate risk more effectively, here’s a breakdown of what risk management is and why it’s important.

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What Is Risk Management?

Risk management is the systematic process of identifying, assessing, and mitigating threats or uncertainties that can affect your organization. It involves analyzing risks’ likelihood and impact, developing strategies to minimize harm, and monitoring measures’ effectiveness.

“Competing successfully in any industry involves some level of risk,” says Harvard Business School Professor Robert Simons, who teaches the online course Strategy Execution . “But high-performing businesses with high-pressure cultures are especially vulnerable. As a manager, you need to know how and why these risks arise and how to avoid them.”

According to Strategy Execution , strategic risk has three main causes:

• Pressures due to growth: This is often caused by an accelerated rate of expansion that makes staffing or industry knowledge gaps more harmful to your business.
• Pressures due to culture: While entrepreneurial risk-taking can come with rewards, executive resistance and internal competition can cause problems.
• Pressures due to information management: Since information is key to effective leadership , gaps in performance measures can result in decentralized decision-making.

These pressures can lead to several types of risk that you must manage or mitigate to avoid reputational, financial, or strategic failures. However, risks aren’t always obvious.

“I think one of the challenges firms face is the ability to properly identify their risks,” says HBS Professor Eugene Soltes in Strategy Execution .

Therefore, it’s crucial to pinpoint unexpected events or conditions that could significantly impede your organization’s business strategy .

Related: Business Strategy vs. Strategy Execution: Which Course Is Right for Me?

According to Strategy Execution , strategic risk comprises:

• Operations risk: This occurs when internal operational errors interrupt your products or services’ flow. For example, shipping tainted products can negatively affect food distribution companies.
• Asset impairment risk: When your company’s assets lose a significant portion of their current value because of a decreased likelihood of receiving future cash flows . For instance, losing property assets, like a manufacturing plant, due to a natural disaster.
• Competitive risk: Changes in the competitive environment can interrupt your organization’s ability to create value and differentiate its offerings—eventually leading to a significant loss in revenue.
• Franchise risk: When your organization’s value erodes because stakeholders lose confidence in its objectives. This primarily results from failing to control any of the strategic risk sources listed above.

Understanding these risks is essential to ensuring your organization’s long-term success. Here’s a deeper dive into why risk management is important.

4 Reasons Why Risk Management Is Important

1. protects organization’s reputation.

In many cases, effective risk management proactively protects your organization from incidents that can affect its reputation.

“Franchise risk is a concern for all businesses,“ Simons says in Strategy Execution . “However, it's especially pressing for businesses whose reputations depend on the trust of key constituents.”

For example, airlines are particularly susceptible to franchise risk because of unforeseen events, such as flight delays and cancellations caused by weather or mechanical failure. While such incidents are considered operational risks, they can be incredibly damaging.

In 2016, Delta Airlines experienced a national computer outage, resulting in over 2,000 flight cancellations. Delta not only lost an estimated $150 million but took a hit to its reputation as a reliable airline that prided itself on “canceling cancellations.”

While Delta bounced back, the incident illustrates how mitigating operational errors can make or break your organization.

2. Minimizes Losses

Most businesses create risk management teams to avoid major financial losses. Yet, various risks can still impact their bottom lines.

A Vault Platform study found that dealing with workplace misconduct cost U.S. businesses over $20 billion in 2021. In addition, Soltes says in Strategy Execution that corporate fines for misconduct have risen 40-fold in the U.S. over the last 20 years.

One way to mitigate financial losses related to employee misconduct is by implementing internal controls. According to Strategy Execution , internal controls are the policies and procedures designed to ensure reliable accounting information and safeguard company assets.

“Managers use internal controls to limit the opportunities employees have to expose the business to risk,” Simons says in the course.

One company that could have benefited from implementing internal controls is Volkswagen (VW). In 2015, VW whistle-blowers revealed that the company’s engineers deliberately manipulated diesel vehicles’ emissions data to make them appear more environmentally friendly.

This led to severe consequences, including regulatory penalties, expensive vehicle recalls, and legal settlements—all of which resulted in significant financial losses. By 2018, U.S. authorities had extracted $25 billion in fines, penalties, civil damages, and restitution from the company.

Had VW maintained more rigorous internal controls to ensure transparency, compliance, and proper oversight of its engineering practices, perhaps it could have detected—or even averted—the situation.

Related: What Are Business Ethics & Why Are They Important?

3. Encourages Innovation and Growth

Risk management isn’t just about avoiding negative outcomes. It can also be the catalyst that drives your organization’s innovation and growth.

“Risks may not be pleasant to think about, but they’re inevitable if you want to push your business to innovate and remain competitive,” Simons says in Strategy Execution .

According to PwC , 83 percent of companies’ business strategies focus on growth, despite risks and mixed economic signals. In Strategy Execution , Simons notes that competitive risk is a challenge you must constantly monitor and address.

“Any firm operating in a competitive market must focus its attention on changes in the external environment that could impair its ability to create value for its customers,” Simons says.

This requires incorporating boundary systems —explicit statements that define and communicate risks to avoid—to ensure internal controls don’t extinguish innovation.

“Boundary systems are essential levers in businesses to give people freedom,” Simons says. “In such circumstances, you don’t want to stifle innovation or entrepreneurial behavior by telling people how to do their jobs. And if you want to remain competitive, you’ll need to innovate and adapt.”

Netflix is an example of how risk management can inspire innovation. In the early 2000s, the company was primarily known for its DVD-by-mail rental service. With growing competition from video rental stores, Netflix went against the grain and introduced its streaming service. This changed the market, resulting in a booming industry nearly a decade later.

Netflix’s innovation didn’t stop there. Once the steaming services market became highly competitive, the company shifted once again to gain a competitive edge. It ventured into producing original content, which ultimately helped differentiate its platform and attract additional subscribers.

By offering more freedom within internal controls, you can encourage innovation and constant growth.

4. Enhances Decision-Making

Risk management also provides a structured framework for decision-making. This can be beneficial if your business is inclined toward risks that are difficult to manage.

By pulling data from existing control systems to develop hypothetical scenarios, you can discuss and debate strategies’ efficacy before executing them.

“Interactive control systems are the formal information systems managers use to personally involve themselves in the decision activities of subordinates,” Simons says in Strategy Execution . “Decision activities that relate to and impact strategic uncertainties.”

JPMorgan Chase, one of the most prominent financial institutions in the world, is particularly susceptible to cyber risks because it compiles vast amounts of sensitive customer data . According to PwC , cybersecurity is the number one business risk on managers’ minds, with 78 percent worried about more frequent or broader cyber attacks.

Using data science techniques like machine learning algorithms enables JPMorgan Chase’s leadership not only to detect and prevent cyber attacks but address and mitigate risk.

Start Managing Your Organization's Risk

Risk management is essential to business. While some risk is inevitable, your ability to identify and mitigate it can benefit your organization.

But you can’t plan for everything. According to the Harvard Business Review , some risks are so remote that no one could have imagined them. Some result from a perfect storm of incidents, while others materialize rapidly and on enormous scales.

By taking an online strategy course , you can build the knowledge and skills to identify strategic risks and ensure they don’t undermine your business. For example, through an interactive learning experience, Strategy Execution enables you to draw insights from real-world business examples and better understand how to approach risk management.

Do you want to mitigate your organization’s risks? Explore Strategy Execution —one of our online strategy courses —and download our free strategy e-book to gain the insights to build a successful strategy.

About the Author

Value and resilience through better risk management

Today’s corporate leaders navigate a complex environment that is changing at an ever-accelerating pace. Digital technology underlies much of the change. Business models are being transformed by new waves of automation, based on robotics and artificial intelligence. Producers and consumers are making faster decisions, with preferences shifting under the influence of social media and trending news. New types of digital companies are exploiting the changes, disrupting traditional market leaders and business models. And as companies digitize more parts of their organization, the danger of cyberattacks and breaches of all kinds grows.

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Beyond cyberspace, the risk environment is equally challenging. Regulation enjoys broad popular support in many sectors and regions; where it is tightening, it is putting stresses on profitability. Climate change is affecting operations and consumers and regulators are also making demands for better business conduct in relation to the natural environment. Geopolitical uncertainties alter business conditions and challenge the footprints of multinationals. Corporate reputations are vulnerable to single events, as risks once thought to have a limited probability of occurrence are actually materializing.

The role of the board and senior executives

Risk management at nonfinancial companies has not kept pace with this evolution. For many nonfinancial corporates, risk management remains an underdeveloped and siloed capability in the organization, receiving limited attention from the most senior leaders. From over 1,100 respondents to McKinsey’s Global Board Survey for 2017 , we discovered that risk management remains a relatively low-priority topic at board meetings (exhibit).

A long way to go

Boards spend only 9 percent of their time on risk—slightly less than they did in 2015. Other questions in the survey revealed that only 6 percent of respondents believe that they are effective in managing risk (again, less than in 2015). Some individual risk areas are relatively neglected, and even cybersecurity, a core risk area with increasing importance, is addressed by only 36 percent of boards. While many senior executives stay focused on strategy and performance management, they often fail to challenge capabilities or strategic decisions from a risk perspective (see sidebar, “A long way to go”). A reactive approach to risks remains too common, with action taken only after things go wrong. The result is that boards and senior executives needlessly put their companies at risk, while personally taking on higher legal and reputational liabilities.

Boards have a critical role to play in developing risk-management capabilities at the companies they oversee. First, boards need to ensure that a robust risk-management operating model is in place. Such a model allows companies to understand and prioritize risks, set their risk appetite, and measure their performance against these risks. The model should enable the board and senior executives to work with businesses to eliminate exposures outside the company’s appetite statement, reducing the risk profile where warranted, through such means as quality controls and other operational processes. On strategic opportunities and risk trade-offs, boards should foster explicit discussions and decision making among top management and the businesses. This will enable the efficient deployment of scarce risk resources and the active, coordinated management of risks across the organization. Companies will then be prepared to address and manage emerging crises when risks do materialize.

A sectoral view of risks

Most companies operate in a complex, industry-specific risk environment. They must navigate macroeconomic and geopolitical uncertainties and face risks arising in the areas of strategy, finance, products, operations, and compliance and conduct. In some sectors, companies have developed advanced approaches to managing risks that are specific to their business models. These approaches can sustain significant value. At the same time companies are challenged by emerging types of risks for which they need to develop effective mitigation plans; in their absence, the losses from serious risk events can be crippling.

• Automotive companies are controlling supply-chain risks with sophisticated monitoring models that allow OEMs to identify potential risks upfront across the supply chain. At the same time, auto companies must address the strategic challenge of shifting toward electric-powered and autonomous vehicles.
• Pharma companies seek to manage the downside risk of large investments in their product portfolio and pipeline, while addressing product quality and patient safety to comply with relevant regulatory requirements.
• Oil and gas, steel, and energy companies apply advanced approaches to manage the negative effects of financial markets and commodity-price volatility. As social and political demands for cleaner energy are increasing, these companies are actively pursuing growth opportunities to shift their portfolios in anticipation of an energy transition and a low-carbon future.
• Consumer-goods companies protect their reputation and brand value through sound practices to manage product quality as well as labor conditions in their production facilities. Yet they are constantly challenged to meet consumers’ ever-changing tastes and needs, as well as consumer-protection regulations.

Toward proactive risk management

An approach based on adherence to minimum regulatory standards and avoidance of financial loss creates risk in itself. In a passive stance, companies cannot shape an optimal risk profile according to their business models nor adequately manage a fast-moving crisis. Eschewing a risk approach comprised of short-term performance initiatives focused on revenue and costs, top performers deem risk management as a strategic asset, which can sustain significant value over the long term. Inherent in the proactive approach are several essential components.

Strategic decision making

More rigorous, debiased strategic decision making can enhance the longer-term resilience of a company’s business model, particularly in volatile markets or externally challenged industries. Research shows that the active, regular reevaluation of resource allocation, based on sound assessments of risk and return trade-offs (such as entering markets where the business model is superior to the competition), creates more value and better shareholder returns. 1 See, for example, Yuval Atsmon, “ How nimble resource allocation can double your company’s value ,” August 2016; William N. Thorndike, Jr., The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success , Boston, MA: Harvard Business Review Press, 2012; Rebecca Darr and Tim Koller, “ How to build an alliance against corporate short-termism ,” January 2017. Flexibility is empowering in a dynamic marketplace. Many companies use hedging strategies to insure against market uncertainties. Airlines, for example, have been known to hedge future exposures to fuel-price fluctuations, a move that can help maintain profitability when prices climb. Likewise, strategic investing, based on a longer-term perspective and a deep understanding of a company’s core proposition, generates more value than opportunistic moves aiming at a short-term bump in the share price.

Debiasing and stress-testing

Approaches that include debiasing and stress-testing help senior executives consider previously overlooked sources of uncertainty to judge whether the company’s risk-bearing capacity can absorb their potential impact. A utility in Germany, for example, improved decision making by taking action to mitigate behavioral biases. As a result, it separated its renewables business from its conventional power-generation operations. In the aftermath of the Fukushima disaster, which sharply raised interest in environmentally friendly power generation, the utility’s move led to a significant positive effect on its share price (15 percent above the industry index).

Higher-quality products and safety standards

Investments in product quality and safety standards can bring significant returns. One form this takes in the energy sector is reduced damage and maintenance costs. At one international energy company, improved safety standards led to a 30 percent reduction in the frequency of hazardous incidents. Auto companies with reputations built on safety can command higher prices for their vehicles, while the better reputation created by higher quality standards in pharma creates obvious advantages. As well as the boost in demand that comes from a reputation for quality, companies can significantly reduce their remediation costs—McKinsey research suggests that pharma companies suffering from quality issues lose annual revenue equal to 4 to 5 percent of cost of goods sold.

Comprehensive operative controls

These can lead to more efficient and effective processes that are less prone to disruption when risks materialize. In the auto sector, companies can ensure stable production and sales by mitigating the risk of supply-chain disruption. Following the 2011 earthquake and tsunami, a leading automaker probed potential supply bottlenecks and took appropriate action. After an earthquake in 2016, the company quickly redirected production of affected parts to other locations, avoiding costly disruptions. In high-tech, companies applying superior supply-chain risk management can achieve lasting cost savings and higher margins. One global computer company addressed these risks with a dedicated program that saved $500 million during its first six years. The program used risk-informed contracts, enabling suppliers to lower the costs and risks of doing business with the company. The measures achieved supply assurance for key components, particularly during market shortages, improved cost predictability for components that have volatile costs, and optimized inventory levels internally and at suppliers.

Stronger ethical and societal standards

To achieve standing among customers, employees, business partners, and the public, companies can apply ethical controls on corporate practices end to end. If appropriately publicized and linked to corporate social responsibility, a program of better ethical standards can achieve significant returns in the form of heightened reputation and brand recognition. Customers, for example, are increasingly willing to pay a premium for products of companies that adhere to tighter standards. Employees too appreciate being associated with more ethical companies, offering a better working environment and contributing to society.

The three dimensions of effective risk management

Ideally, risk management and compliance are addressed as strategic priorities by corporate leadership and day-to-day management. More often the reality is that these areas are delegated to a few people at the corporate center working in isolation from the rest of the business. By contrast, revenue growth or cost savings are deeply embedded in corporate culture, linked explicitly to profit-and-loss (P&L) performance at the company level. Somewhere in the middle are specific control capabilities regarding, for example, product safety, secure IT development and deployment, or financial auditing.

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To change this picture, leadership must commit to building robust, effective risk management. The project is three-dimensional: 1) the risk operating model, consisting of the main risk management processes; 2) a governance and accountability structure around these processes, leading from the business up to the board level; and 3) best-practice crisis preparedness, including a well-articulated response playbook if the worst case materializes.

1. Developing an effective risk operating model

The operating model consists of two layers, an enterprise risk management (ERM) framework and individual frameworks for each type of risk. The ERM framework is used to identify risks across the organization, define the overall risk appetite, and implement the appropriate controls to ensure that the risk appetite is respected. Finally, the overarching framework puts in place a system of timely reporting and corresponding actions on risk to the board and senior management. The risk-specific frameworks address all risks that are being managed. These can be grouped in categories, such as financial, nonfinancial, and strategic. Financial risks, such as liquidity, market, and credit risks, are managed by adhering to appropriate limit structures; nonfinancial risks, by implementing adequate process controls; strategic risks, by challenging key decisions with formalized approaches such as debiasing, scenario analyses, and stress testing. While financial and strategic risks are typically managed according to the risk-return trade-off, for nonfinancial risks, the potential downside is often the key consideration.

Finding the right level of risk appetite

Companies need to find the right level of risk appetite, which helps ensure long-term resilience and performance. Risk appetite that is too relaxed or too restrictive can have severe consequences on company financials, as the following two examples indicate:

Too relaxed. One nuclear energy company set its standards for steel equipment in the 1980s and did not review them even when the regulations changed. When the new higher standards were applied to the manufacture of equipment for nuclear power plants, the company fell short of compliance. An earlier adaptation of its risk appetite and tolerance levels would have been significantly less costly.

Too restrictive. A pharma company set quality tolerances to produce a drug to a significantly stricter level than what was required by regulation. At the beginning of production, tolerance intervals could be fulfilled, but over time, quality could no longer be assured at the initial level. The company was unable to lower standards, as these had been communicated to the regulators. Ultimately, production processes had to be upgraded at a significant cost to maintain the original tolerances.

As well as assessing risk based on likelihood and impact, companies must also assess their ability to respond to emerging risks. Capabilities and capacities needed to manage these risks should be evaluated and gaps filled accordingly. Of particular importance in crisis management is the timeliness of an effective response when things go awry. The highly likely, high-impact risk events on which risk management focuses most of its attention often emerge with disarming velocity, taking many companies unawares. To be effective, the enterprise risk management framework must ensure that the two layers are seamlessly integrated. It does this by providing clarity on risk definitions and appetite as well as controls and reporting.

• Taxonomy. A company-wide risk taxonomy should clearly and comprehensively define risks; the taxonomy should be strictly respected in the definition of risk appetite, in the development of risk policy and strategy, and in risk reporting. Taxonomies are usually industry-specific, covering strategic, regulatory, and product risks relevant to the industry. They are also determined by company characteristics, including the business model and geographical footprint (to incorporate specific country and legal risks). Proven risk-assessment tools need to be adopted and enhanced continuously with new techniques, so that newer risks (such as cyberrisk) are addressed as well as more familiar risks.
• Risk appetite. A clear definition of risk appetite will translate risk-return trade-offs into explicit thresholds and limits for financial and strategic risks, such as economic capital, cash-flow at risk, or stressed metrics. In the case of nonfinancial risks like operational and compliance risks, the risk appetite will be based on overall loss limits, categorized into inherent and residual risks (see sidebar, “Finding the right level of risk appetite”).
• Risk control processes. Effective risk control processes ensure that risk thresholds for the specified risk appetite are upheld at all levels of the organization. Leading companies are increasingly building their control processes around big data and advanced analytics. These powerful new capabilities can greatly increase the effectiveness and efficiency of risk monitoring processes. Machine-learning tools, for example, can be very effective in monitoring fraud and prioritizing investigations; automated natural language processing within complaints management can be used to monitor conduct risk.
• Risk reporting. Decision making should be informed with risk reporting. Companies can regularly provide boards and senior executives with insights on risk, identifying the most relevant strategic risks. The objective is to ensure that an independent risk view, encompassing all levels of the organization, is embedded into the planning process. In this way, the risk profile can be upheld in the management of business initiatives and decisions affecting the quality of processes and products. Techniques like debiasing and the use of scenarios can help overcome biases toward fulfilment of short-term goals. A North American oil producer developed a strategic hypothesis given uncertainties in global and regional oil markets. The company used risk modelling to test assumptions about cash flow under different scenarios and embedded these analyses into the reports reviewed by senior management and the board. Weak points in the strategy were thereby identified and mitigating actions taken.

2. Toward robust risk governance, organization, and culture

The risk operating model must be managed through an effective governance structure and organization with clear accountabilities. The governance model maintains a risk culture that strongly reinforces better risk and compliance management across the three lines of defense—business and operations, the compliance and risk functions, and audit. The approach recognizes the inherent contradiction in the first line between performance (revenue and costs) and risk (losses). The role of the second line is to review and challenge the first line on the effectiveness of its risk processes and controls, while the third line, audit, ensures that the lines one and two are functioning as intended.

• Three lines of defense. Effective implementation of the three lines involves the sharp definition of lines one and two at all levels, from the group level through the lines of business, to the regional and legal entity levels. Accountabilities regarding risk and control management must be clear. Risk governance may differ by risk type: financial risks are usually managed centrally, while operational risks are deeply embedded into company processes. The operational risk of any line of business is managed by the business owning the product-development, production, and sales processes. This usually translates into forms of quality control, but the business must also balance the broader impact of risk and P&L. In the development of new diesel engines, automakers lost sight of the balance between compliance risk and the additional cost to meet emission standards, with disastrous results. Risk or compliance functions can only complement these activities by independently reviewing the adequacy of operational risk management, such as through technical standards and controls.
• Reviewing the risk appetite and risk profile. Of central importance within the governance structure are the committees that define the risk appetite, including the parameters for doing business. These committees also make specific decisions on top risks and review the control environment for enhancements as the company’s risk profile changes. Good governance in this case means that risk decisions are considered within the existing divisional, regional, and senior-management governance structure of a company, supported by risk, compliance, and audit committees.
• Integrated risk and compliance governance setup. A robust and adequately staffed risk and compliance organization supports all risk processes. The integrated risk and compliance organization provides for single ownership of the group-wide ERM framework and standards, appropriate clustering of second-line functions, a clear matrix between divisions and control functions, and centralized or local control as needed. A clear trend is observable whereby the ERM layer responsible for group-wide standards, risk processes, and reporting becomes consolidated, whereas the expert teams setting and monitoring specific control standards for the business (including standards for commercial, technical compliance, IT or cyberrisks) become specialized teams covering both regulatory compliance as well as risk aspects.
• Resources. Appropriate resources are a critical factor in successful risk governance. The size of the compliance, risk, audit, and legal functions of nonfinancial companies (0.5 for every 100 employees, on average), are usually much smaller than those of banks (6.9 for every 100 employees). The disparity is partly a natural outcome of financial regulation, but some part of it reflects a capability gap in nonfinancial corporates. These companies usually devote most of their risk and control resources in sector-specific areas, such as health and safety for airlines and nuclear power companies or quality assurance for pharmaceutical companies. The same companies can, however, neglect to provide sufficient resources to monitor highly significant risks, such as cyberrisk or large investments.
• Risk culture. An enhanced risk culture covers mind-sets and behaviors across the organization. A shared understanding is fostered of key risks and risk management, with leaders acting as role models. Especially important are capability-building programs on risk as well as formal mechanisms to assess and reinforce sound risk management practices.

An enhanced risk culture covers mind-sets and behaviors across the organization. A shared understanding is fostered of key risks and risk management, with leaders acting as role models.

3. Crisis preparedness and response

A high-performing, effective risk operating model and governance structure, with a well-developed risk culture minimize the probability of corporate crises , without, of course, completely eliminating them. When unexpected crises strike at high velocity, multinational companies can lose billions in value in the first days and soon find themselves struggling to keep their market position. A best-in-class risk management environment provides the ideal conditions for preparation and response.

• Ensure board leadership. The most important action companies can take to prepare for crises is to ensure that the effort is led by the board and senior management. Top leadership must define the main expected threats, the worst-case scenarios, and the actions and communications that will be accordingly rolled out. For each threat, hypothetical scenarios should be developed for how a crisis will unfold, based on previous crises within and beyond the company’s industry and region.
• Strengthen resilience. By mapping patterns that arose in previous crises, companies can test their own resilience, challenging key areas across the organization for potential weaknesses. Targeted countermeasures can then be developed in advance to strengthen resilience. This crucial aspect of crisis preparedness can involve reviewing and revising the terms and conditions for key suppliers, shoring up financials to ensure short-term availability of cash, or investing in advanced cybersecurity measures to protect essential data and software in the event of failures and breaches.
• Develop action plans and communications. Once these assessments are complete and resilience-building countermeasures are in place, the company can then develop action plans for each threat. The plans must be well articulated, founded on past crises, and address operational and technical planning, financial planning, third-party management, and legal planning. Care should be taken to develop an optimally responsive communications strategy as well. The correct strategy will enable frontline responders to keep pace with or stay ahead of unfolding crises. Communications failures can turn manageable crises into irredeemable catastrophes. Companies need to have appropriate scripts and process logic in place detailing the response to crisis situations, communicated to all levels of the organization and well anchored there. Airlines provide an example of the well-articulated response, in their preparedness for an accident or crash. Not only are detailed scripts in place, but regular simulations are held to train employees at all levels of the company.
• Train managers at all levels. The company should train key managers at multiple levels on what to expect and enable them to feel the pressures and emotions in a simulated environment. Doing this repeatedly and in a richer way each time will significantly improve the company’s response capabilities in a real crisis situation, even though the crisis may not be precisely the one for which managers have been trained. They will also be valuable learning exercises in their own right.
• Put in place a detailed crisis-response playbook. While each crisis can unfold in unique and unpredictable ways, companies can follow a few fundamental principles of crisis response in all situations. First, establish control immediately after the crisis hits, by closely determining the level of exposure to the threat and identifying a crisis-response leader, not necessarily the CEO, who will direct appropriate actions accordingly. Second, involved parties—such as customers, employees, shareholders, suppliers, government agencies, the media, and the wider public—must be effectively engaged with a dynamic communications strategy. Third, an operational and technical “war room” should be set up, to stabilize primary threats and determine which activities to sustain and which to suspend (identifying and reaching out to critical suppliers). Finally, a deliberate effort must be made to address and neutralize the root cause of the crisis and so bring it to an end as soon as possible.

In a digitized, networked world, with globalized supply chains and complex financial interdependencies, the risk environment has grown more perilous and costly. A holistic approach to risk management, based on the lessons, good and bad, of leading companies and financial institutions, can derive value from that environment. The path to risk resilience that is emerging is an effort, led by the board and senior management, to establish the right risk profile and appetite. Success depends on the support of a thriving risk culture and state-of-the-art crisis preparedness and response. Far from minimal regulatory adherence and loss avoidance, the optimal approach to risk management consists of fundamentally strategic capabilities, deeply embedded across the organization.

Daniela Gius is a senior expert in McKinsey’s Hamburg office, Jean-Christophe Mieszala is a senior partner in the Paris office, Ernestos Panayiotou is a partner in the Athens office, and Thomas Poppensieker is a senior partner in the Munich office.

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Risk Management 101: Process, Examples, Strategies

Emily Villanueva

August 16, 2023

Effective risk management takes a proactive and preventative stance to risk, aiming to identify and then determine the appropriate response to the business and facilitate better decision-making. Many approaches to risk management focus on risk reduction, but it’s important to remember that risk management practices can also be applied to opportunities, assisting the organization with determining if that possibility is right for it.

Risk management as a discipline has evolved to the point that there are now common subsets and branches of risk management programs, from enterprise risk management (ERM) , to cybersecurity risk management, to operational risk management (ORM) , to  supply chain risk management (SCRM) . With this evolution, standards organizations around the world, like the US’s National Institute of Standards and Technology (NIST) and the International Standards Organization (ISO) have developed and released their own best practice frameworks and guidance for businesses to apply to their risk management plan.

Companies that adopt and continuously improve their risk management programs can reap the benefits of improved decision-making, a higher probability of reaching goals and business objectives, and an augmented security posture. But, with risks proliferating and the many types of risks that face businesses today, how can an organization establish and optimize its risk management processes? This article will walk you through the fundamentals of risk management and offer some thoughts on how you can apply it to your organization.

What Are Risks?

We’ve been talking about risk management and how it has evolved, but it’s important to clearly define the concept of risk. Simply put, risks are the things that could go wrong with a given initiative, function, process, project, and so on. There are potential risks everywhere — when you get out of bed, there’s a risk that you’ll stub your toe and fall over, potentially injuring yourself (and your pride). Traveling often involves taking on some risks, like the chance that your plane will be delayed or your car runs out of gas and leave you stranded. Nevertheless, we choose to take on those risks, and may benefit from doing so. 

Companies should think about risk in a similar way, not seeking simply to avoid risks, but to integrate risk considerations into day-to-day decision-making.

• What are the opportunities available to us?
• What could be gained from those opportunities?
• What is the business’s risk tolerance or risk appetite – that is, how much risk is the company willing to take on?
• How will this relate to or affect the organization’s goals and objectives?
• Are these opportunities aligned with business goals and objectives?

With that in mind, conversations about risks can progress by asking, “What could go wrong?” or “What if?” Within the business environment, identifying risks starts with key stakeholders and management, who first define the organization’s objectives. Then, with a risk management program in place, those objectives can be scrutinized for the risks associated with achieving them. Although many organizations focus their risk analysis around financial risks and risks that can affect a business’s bottom line, there are many types of risks that can affect an organization’s operations, reputation, or other areas.

Remember that risks are hypotheticals — they haven’t occurred or been “realized” yet. When we talk about the impact of risks, we’re always discussing the potential impact. Once a risk has been realized, it usually turns into an incident, problem, or issue that the company must address through their contingency plans and policies. Therefore, many risk management activities focus on risk avoidance, risk mitigation, or risk prevention.

What Different Types of Risks Are There?

There’s a vast landscape of potential risks that face modern organizations. Targeted risk management practices like ORM and SCRM have risen to address emerging areas of risk, with those disciplines focused on mitigating risks associated with operations and the supply chain. Specific risk management strategies designed to address new risks and existing risks have emerged from these facets of risk management, providing organizations and risk professionals with action plans and contingency plans tailored to unique problems and issues.

Common types of risks include: strategic, compliance, financial, operational, reputational, security, and quality risks.

Strategic Risk

Strategic risks are those risks that could have a potential impact on a company’s strategic objectives, business plan, and/or strategy. Adjustments to business objectives and strategy have a trickle-down effect to almost every function in the organization. Some events that could cause strategic risks to be realized are: major technological changes in the company, like switching to a new tech stack; large layoffs or reductions-in-force (RIFs); changes in leadership; competitive pressure; and legal changes.

Compliance Risk

Compliance risks materialize from regulatory and compliance requirements that businesses are subject to, like Sarbanes-Oxley for publicly-traded US companies, or GDPR for companies that handle personal information from the EU. The consequence or impact of noncompliance is generally a fine from the governing body of that regulation. These types of risks are realized when the organization does not maintain compliance with regulatory requirements, whether those requirements are environmental, financial, security-specific, or related to labor and civil laws.

Financial Risk

Financial risks are fairly self-explanatory — they have the possibility of affecting an organization’s profits. These types of risks often receive significant attention due to the potential impact on a company’s bottom line. Financial risks can be realized in many circumstances, like performing a financial transaction, compiling financial statements, developing new partnerships, or making new deals.

Operational Risk

Risks to operations, or operational risks, have the potential to disrupt daily operations involved with running a business. Needless to say, this can be a problematic scenario for organizations with employees unable to do their jobs, and with product delivery possibly delayed. Operational risks can materialize from internal or external sources — employee conduct, retention, technology failures, natural disasters, supply chain breakdowns — and many more.

Reputational Risk

Reputational risks are an interesting category. These risks look at a company’s standing in the public and in the media and identify what could impact its reputation. The advent of social media changed the reputation game quite a bit, giving consumers direct access to brands and businesses. Consumers and investors too are becoming more conscious about the companies they do business with and their impact on the environment, society, and civil rights. Reputational risks are realized when a company receives bad press or experiences a successful cyber attack or security breach; or any situation that causes the public to lose trust in an organization.

Security Risk

Security risks have to do with possible threats to your organization’s physical premises, as well as information systems security. Security breaches, data leaks, and other successful types of cyber attacks threaten the majority of businesses operating today. Security risks have become an area of risk that companies can’t ignore, and must safeguard against.

Quality Risk

Quality risks are specifically associated with the products or services that a company provides. Producing low-quality goods or services can cause an organization to lose customers, ultimately affecting revenue. These risks are realized when product quality drops for any reason — whether that’s technology changes, outages, employee errors, or supply chain disruptions.

Steps in the Risk Management Process

The six risk management process steps that we’ve outlined below will give you and your organization a starting point to implement or improve your risk management practices. In order, the risk management steps are: 

• Risk identification
• Risk analysis or assessment
• Controls implementation
• Resource and budget allocation
• Risk mitigation
• Risk monitoring, reviewing, and reporting

If this is your organization’s first time setting up a risk management program, consider having a formal risk assessment completed by an experienced third party, with the goal of producing a risk register and prioritized recommendations on what activities to focus on first. Annual (or more frequent) risk assessments are usually required when pursuing compliance and security certifications, making them a valuable investment.

Step 1: Risk Identification

The first step in the risk management process is risk identification. This step takes into account the organization’s overarching goals and objectives, ideally through conversations with management and leadership. Identifying risks to company goals involves asking, “What could go wrong?” with the plans and activities aimed at meeting those goals. As an organization moves from macro-level risks to more specific function and process-related risks, risk teams should collaborate with critical stakeholders and process owners, gaining their insight into the risks that they foresee.

As risks are identified, they should be captured in formal documentation — most organizations do this through a risk register, which is a database of risks, risk owners, mitigation plans, and risk scores.

Step 2: Risk Analysis or Assessment

Analyzing risks, or assessing risks, involves looking at the likelihood that a risk will be realized, and the potential impact that risk would have on the organization if that risk were realized. By quantifying these on a three- or five-point scale, risk prioritization becomes simpler. Multiplying the risk’s likelihood score with the risk’s impact score generates the risk’s overall risk score. This value can then be compared to other risks for prioritization purposes.

The likelihood that a risk will be realized asks the risk assessor to consider how probable it would be for a risk to actually occur. Lower scores indicate less chances that the risk will materialize. Higher scores indicate more chances that the risk will occur.

Likelihood, on a 5×5 risk matrix, is broken out into:

• Highly Unlikely
• Highly Likely

The potential impact of a risk, should it be realized, asks the risk assessor to consider how the business would be affected if that risk occurred. Lower scores signal less impact to the organization, while higher scores indicate more significant impacts to the company.

Impact, on a 5×5 risk matrix, is broken out into:

• Negligible Impact
• Moderate Impact
• High Impact
• Catastrophic Impact

Risk assessment matrices help visualize the relationship between likelihood and impact, serving as a valuable tool in risk professionals’ arsenals.

Organizations can choose whether to employ a 5×5 risk matrix, as shown above, or a 3×3 risk matrix, which breaks likelihood, impact, and aggregate risk scores into low, moderate, and high categories.

Step 3: Controls Assessment and Implementation

Once risks have been identified and analyzed, controls that address or partially address those risks should be mapped. Any risks that don’t have associated controls, or that have controls that are inadequate to mitigate the risk, should have controls designed and implemented to do so.

Step 4: Resource and Budget Allocation

This step, the resource and budget allocation step, doesn’t get included in a lot of content about risk management. However, many businesses find themselves in a position where they have limited resources and funds to dedicate to risk management and remediation. Developing and implementing new controls and control processes is timely and costly; there’s usually a learning curve for employees to get used to changes in their workflow.

Using the risk register and corresponding risk scores, management can more easily allocate resources and budget to priority areas, with cost-effectiveness in mind. Each year, leadership should re-evaluate their resource allocation as part of annual risk lifecycle practices.

Step 5: Risk Mitigation

The risk mitigation step of risk management involves both coming up with the action plan for handling open risks, and then executing on that action plan. Mitigating risks successfully takes buy-in from various stakeholders. Due to the various types of risks that exist, each action plan may look vastly different between risks. 

For example, vulnerabilities present in information systems pose a risk to data security and could result in a data breach. The action plan for mitigating this risk might involve automatically installing security patches for IT systems as soon as they are released and approved by the IT infrastructure manager. Another identified risk could be the possibility of cyber attacks resulting in data exfiltration or a security breach. The organization might decide that establishing security controls is not enough to mitigate that threat, and thus contract with an insurance company to cover off on cyber incidents. Two related security risks; two very different mitigation strategies. 

One more note on risk mitigation — there are four generally accepted “treatment” strategies for risks. These four treatments are:

• Risk Acceptance: Risk thresholds are within acceptable tolerance, and the organization chooses to accept this risk.
• Risk Transfer : The organization chooses to transfer the risk or part of the risk to a third party provider or insurance company.
• Risk Avoidance : The organization chooses not to move forward with that risk and avoids incurring it.
• Risk Mitigation : The organization establishes an action plan for reducing or limiting risk to acceptable levels.

If an organization is not opting to mitigate a risk, and instead chooses to accept, transfer, or avoid the risk, these details should still be captured in the risk register, as they may need to be revisited in future risk management cycles.

Step 6: Risk Monitoring, Reviewing, and Reporting

The last step in the risk management lifecycle is monitoring risks, reviewing the organization’s risk posture, and reporting on risk management activities. Risks should be monitored on a regular basis to detect any changes to risk scoring, mitigation plans, or owners. Regular risk assessments can help organizations continue to monitor their risk posture. Having a risk committee or similar committee meet on a regular basis, such as quarterly, integrates risk management activities into scheduled operations, and ensures that risks undergo continuous monitoring. These committee meetings also provide a mechanism for reporting risk management matters to senior management and the board, as well as affected stakeholders.

As an organization reviews and monitors its risks and mitigation efforts, it should apply any lessons learned and use past experiences to improve future risk management plans.

Examples of Risk Management Strategies

Depending on your company’s industry, the types of risks it faces, and its objectives, you may need to employ many different risk management strategies to adequately handle the possibilities that your organization encounters. 

Some examples of risk management strategies include leveraging existing frameworks and best practices, minimum viable product (MVP) development, contingency planning, root cause analysis and lessons learned, built-in buffers, risk-reward analysis, and third-party risk assessments.

Leverage Existing Frameworks and Best Practices

Risk management professionals need not go it alone. There are several standards organizations and committees that have developed risk management frameworks, guidance, and approaches that business teams can leverage and adapt for their own company. 

Some of the more popular risk management frameworks out there include:

• ISO 31000 Family : The International Standards Organization’s guidance on risk management.
• NIST Risk Management Framework (RMF) : The National Institute of Standards and Technology has released risk management guidance compatible with their Cybersecurity Framework (CSF).
• COSO Enterprise Risk Management (ERM) : The Committee of Sponsoring Organizations’ enterprise risk management guidance.

Minimum Viable Product (MVP) Development

This approach to product development involves developing core features and delivering those to the customer, then assessing response and adjusting development accordingly. Taking an MVP path reduces the likelihood of financial and project risks, like excessive spend or project delays by simplifying the product and decreasing development time.

Contingency Planning

Developing contingency plans for significant incidents and disaster events are a great way for businesses to prepare for worst-case scenarios. These plans should account for response and recovery. Contingency plans specific to physical sites or systems help mitigate the risk of employee injury and outages.

Root Cause Analysis and Lessons Learned

Sometimes, experience is the best teacher. When an incident occurs or a risk is realized, risk management processes should include some kind of root cause analysis that provides insights into what can be done better next time. These lessons learned, integrated with risk management practices, can streamline and optimize response to similar risks or incidents.

Built-In Buffers

Applicable to discrete projects, building in buffers in the form of time, resources, and funds can be another viable strategy to mitigate risks. As you may know, projects can get derailed very easily, going out of scope, over budget, or past the timeline. Whether a project team can successfully navigate project risks spells the success or failure of the project. By building in some buffers, project teams can set expectations appropriately and account for the possibility that project risks may come to fruition.

Risk-Reward Analysis

In a risk-reward analysis, companies and project teams weigh the possibility of something going wrong with the potential benefits of an opportunity or initiative. This analysis can be done by looking at historical data, doing research about the opportunity, and drawing on lessons learned. Sometimes the risk of an initiative outweighs the reward; sometimes the potential reward outweighs the risk. At other times, it’s unclear whether the risk is worth the potential reward or not. Still, a simple risk-reward analysis can keep organizations from bad investments and bad deals.

Third-Party Risk Assessments

Another strategy teams can employ as part of their risk management plan is to conduct periodic third-party risk assessments. In this method, a company would contract with a third party experienced in conducting risk assessments, and have them perform one (or more) for the organization. Third-party risk assessments can be immensely helpful for the new risk management team or for a mature risk management team that wants a new perspective on their program. 

Generally, third-party risk assessments result in a report of risks, findings, and recommendations. In some cases, a third-party provider may also be able to help draft or provide input into your risk register. As external resources, third-party risk assessors can bring their experience and opinions to your organization, leading to insights and discoveries that may not have been found without an independent set of eyes.

Components of an Effective Risk Management Plan

An effective risk management plan has buy-in from leadership and key stakeholders; applies the risk management steps; has good documentation; and is actionable. Buy-in from management often determines whether a risk management function is successful or not, since risk management requires resources to conduct risk assessments, risk identification, risk mitigation, and so on. Without leadership buy-in, risk management teams may end up just going through the motions without the ability to make an impact. Risk management plans should be integrated into organizational strategy, and without stakeholder buy-in, that typically does not happen. 

Applying the risk management methodology is another key component of an effective plan. That means following the six steps outlined above should be incorporated into a company’s risk management lifecycle. Identifying and analyzing risks, establishing controls, allocating resources, conducting mitigation, and monitoring and reporting on findings form the foundations of good risk management. 

Good documentation is another cornerstone of effective risk management. Without a risk register recording all of a company’s identified risks and accompanying scores and mitigation strategies, there would be little for a risk team to act on. Maintaining and updating the risk register should be a priority for the risk team — risk management software can help here, providing users with a dashboard and collaboration mechanism.

Last but not least, an effective risk management plan needs to be actionable. Any activities that need to be completed for mitigating risks or establishing controls, should be feasible for the organization and allocated resources. An organization can come up with the best possible, best practice risk management plan, but find it completely unactionable because they don’t have the capabilities, technology, funds, and/or personnel to do so. It’s all well and good to recommend that cybersecurity risks be mitigated by setting up a 24/7 continuous monitoring Security Operations Center (SOC), but if your company only has one IT person on staff, that may not be a feasible action plan.

Executing on an effective risk management plan necessitates having the right people, processes, and technology in place. Sometimes the challenges involved with running a good risk management program are mundane — such as disconnects in communication, poor version control, and multiple risk registers floating around. Risk management software can provide your organization with a unified view of the company’s risks, a repository for storing and updating key documentation like a risk register, and a space to collaborate virtually with colleagues to check on risk mitigation efforts or coordinate on risk assessments. Get started building your ideal risk management plan today!

Emily Villanueva, MBA, is a Senior Manager of Product Solutions at AuditBoard. Emily joined AuditBoard from Grant Thornton, where she provided consulting services specializing in SOX compliance, internal audit, and risk management. She also spent 5 years in the insurance industry specializing in SOX/ICFR, internal audits, and operational compliance. Connect with Emily on LinkedIn .

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Postgraduate international security personal statement example.

Super-hero, fireman, princess, vet? None of these were ever my dream job when I was a child. I wanted to be an airline pilot, then an astronaut, and I still want to work in this field. I am currently a student at IEP Bordeaux, and I am excited to apply to the PSIA Master in International Security in order to go into work in the aeronautical or aerospatial field. My career objectives were developed gradually.

I had the desire to pursue higher education in classe préparatoire B/L thanks to the comic Economix by Michael Goodwin, as well as sociological works - more specifically books with an ethnographic dimension such as Voyage de classe by N. Jounin – that I read during the last two years of my high school. What I retained from this freshman year, beyond the richness of the theoretical aspect of course, would be that I grasped that the world around us is a social construct and should be constantly questioned.

It is this taste for a reflective approach to the world and modernity that was the root of my decision to join Sciences Po Bordeaux where my classes are oriented towards international relations and cooperation within the Caribbean region; and now, to join PSIA.

Alongside my studies, I have continued to develop my passion for all things aeronautical and aerospatial: living next to an aerodrome and seeing planes passing overhead every day must have something to do with it.

During secondary school, I sat my exam of aeronautical initiation (Brevet d’Initiation Aéronautique, BIA) and was voted valedictorian while being one of the youngest in the class. It is thus from this experience that I learnt that hard work is sufficient to achieve your goals.

My first real immersion in the aeronautical world was during a course of flying lessons. I loved the feeling of flying and the resulting adrenaline rush, the constant checking of data, analyzing instruments and resolving problems which can occur for various reasons at any moment. More importantly, this allowed me to acquire various skills such as composure in the face of varied hurdles, and quick analysis of multiple sets of data.

For a long time, it seemed difficult to make my passion for aeronautics and my chosen career path compatible. However, I then participed in my first Model United Nations in Berlin (BerlInMUN) where I had to put myself in the shoes of a diplomat and adopt a pragmatic approach to international relations to create a fictional agreement on the militarization of the cosmos.

This one-week-meeting would go on to be the cornerstone of my career plan. Wanting to gain more professional aeronautical experience, I completed an internship this summer with Safran Landing Systems in risk management, with the aim of developing a system for crisis management on the two Safran sites in Gloucester. I was initially attracted by this internship because the large amount of initiative required and the capacity for analysis and reflection that was afforded to interns: I played an active role in changing the local business.

I was able to learn to anticipate potential crises and plan their management and thus minimize the impact of these events on Safran Group Business. This led me to communicate with all the senior managers of the company, propose solutions and to develop my capacity to adapt and conciliation.

Working for a French company based in England was very formative because I was required to respect English norms and rules while following French instructions. These two experiences accumulated my desire to work in the aeronautical sphere.

Later, I wish to help ensure a peaceful airspace and aerospace notably by developing cooperation in space between different actors. I wrote an essay focusing on the issues related to outer space policy, and I observed that countries like Russia and China have historically sought to fill gaps in the treaties related to the militarisation of space. However, there seem to be changes in their space policy which are detrimental to peace.

Faced with this problem, I want to bring my modest help to maintain security in space and defend the European position of a peaceful space. Sciences Po will give me the tools so that I can reach my goals with specialized courses such as those on conflict resolutions or the thematic concentration on Global Risks.

I primarily plan to work in the United Nations Office for Outer Space affairs even though I do not rule out the possibility of working for cooperation within space agencies or private companies.

As well as the outstanding courses offered by Sciences Po, I expect the Master to give me the opportunity to continue studying in a multicultural environment and interacting with students from all over the world.

As my strong academic commitment and professional experiences clearly show, I cannot wait to get involved in extracurricular activities to gain further experience and valuable practical skills.

I have already found student societies which match my interests, such as the Model United Nations (MUN). I realised it is far from easy when I was a member of MUN of Sciences Po Bordeaux last year, but it was an amazing and formative experience: it allowed me to face and overcome obstacles, when I had to pretend to be a diplomat by changing my way of speaking for instance.

I am keen to share this enriching experience - in the same ways as I shared my valuable experiences when I was a scoutmaster - and be more involved by managing MUNs within my future university.

I also wish to create a scientific society with perhaps SCUBE students, to promote scientific events within Sciences Po Paris. Indeed, I am a member of an astronomic club and I believe that is important for future leaders to know more about what is beyond them and space politics. I see this Master as an opportunity of a lifetime to fulfill my expectations for my intellectual interests and my professional aspirations.

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Personal Statement: MSc. In Enterprise Risk Management at Columbia University

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Introduction.

Enterprise Risk Management is known wide over to enhance the decision-making process of organizations starting from traditional decisions to those encompassing the strategic aspects. For this reason, the main purpose I want to pursue Enterprise Risk Management at the Columbia University is because I would like to improve my value to the companies I would work with in future and enhance my traditional silo risk management skills. Moreover, with my successful completion of the course, I will have the ability to identify the key risks from all the various channels from which they emanate. While it is important to mitigate risks within the organization, there are issues surrounding rating agencies, shareholders, and stakeholders which are all covered in the Masters of Science in Enterprise Risk Management offered by your institution.

The specific skills and attributes I will bring to the program

I have graduated from the University of Buffalo with a Bachelor of Science in Accounting with vast knowledge in financial accounting, statistics decision in management, and auditing. In particular, the auditing skills I possess will be of great importance to the program as both lay emphasis on the risk profile of companies despite assuming different approaches. On the other hand, auditing entails offering the assurance services related to risk management which is pivotal in creating independence when it comes to reporting. The knowledge gained from Enterprise Risk Management will coalesce with my specific skills in auditing as it will ensure I achieve a greater capability in developing and enforcing an effective risk response when it comes to the decision-making process.

My Current Role

I perform the role of a transport logistics analyst with FreshDirect which runs its operations in New York. My primary responsibilities include conducting operations with the motive of generating cost savings, putting to use specific software to identify business opportunities, identifying trends for better predictions in the future, balancing customer service objectives, and adjusting product routing to meet the set margins. Important to note is that there are multiple risks involved in the process and with the ERM knowledge, I will possess the upper hand in performing qualitative assessments which are vital in generating cost savings. Moreover, the strategic planning skills gained from ERM will assist me in optimizing routing plans and further coming up with reliable future forecasts given as the strategic plan goals are more achievable. Therefore, I will be able to deliver good results to my employers.

How this program will help me achieve my career goal

Becoming a manager or a director of a company are my career goals. However, the roles of these individuals require additional skills such as the ability to adopt a practical approach, being able to exercise risk governance, striking a balance between communication and business-oriented skills, and being flexible. Apart from the accounting, statistics decision management, and auditing skills I possess, the Enterprise Risk Management program will propel me towards my career goal as the additional skills are embodied within it. Mainly, the program is ideal for those individuals who wish to enhance their capabilities in the management of insurable risks, auditing, compliance, and information technology. Therefore, these areas being my main interests I believe will make me realize my career goal upon completion of the program.

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This chapter focuses on planning for the expected: retirement, loss of income from wages, and the subsequent distribution of assets after death. Retirement planning discusses ways to develop alternative sources of income from capital that can eventually substitute for wages. Estate planning also touches on the considerations and mechanics of distributing accumulated wealth.

• 11.1: Retirement Planning- Projecting Needs
• 11.2: Retirement Planning- Ways to Save
• 11.3: Estate Planning

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Personal statement

Risk Management studies are the best studies which give a lot of skills and enough knowledge about administration and managing of different business and organizations. The MSc Financial risk management degree is one of the best degrees which attract people from a wide range of academic disciplines. As in today's world the business became expanded and it was not controllable without proper management. From their, the importance of financial risk management became dominant.. Now a lot of people have studied business administration courses and they are very successful in their jobs and running their businesses very successfully.

Related Papers

Qualitative Research in Financial Markets

Johan Marx , Cecile de Swardt

Purpose-The purpose of this paper is first to determine the competencies required of risk managers and second to consider the implications of such competencies in determining modules for inclusion in the curriculum framework of an undergraduate qualification in risk management. Design/methodology/approach-A qualitative research approach was followed, involving risk management professionals in a focus group and making use of interactive qualitative analysis (IQA). Findings-The competencies identified are managerial and risk management knowledge, attributes such as assertiveness and steadfastness and ethical values, as well as people and technical skills. These are explained in greater detail in this paper. Research limitations/implications-The unique contribution of the current research was the innovative use of IQA for data collection, the removal of subjectivity and the rigour in analysing and presenting the results. The results provide a starting point for designing a curriculum that will both meet the requirements of the professional body and will equip graduates with the best possible combination of knowledge, attributes, values and skills needed by the risk management profession. The implications for further research include that a comparative IQA study of the competencies of risk managers using academics from the field could be undertaken, as well as a study of the design, benchmarking and validation of a proposed curriculum for an undergraduate degree in risk management. The purpose of this study was not to compile a curriculum for a new BCom (risk management). However, this was beyond the scope of the current study. IQA uses rigour and eliminates the bias of the researcher, and the one limitation of this research lies in the use of a focus group, which resulted in the findings not being generalizable as the case would have been with a representative sample used in the positivist paradigm and using appropriate statistical analysis. However, this study was exploratory and could serve as a valuable starting point for further research in this area to perform a comprehensive curriculum development. Practical implications-This study found that constituents of the focus group perceived that the following competencies are required of risk managers, namely, knowledge, skills, attributes and values. These competencies correspond closely with the competencies indicated in the Risk and Insurance Management Society (RIMS) Professional Core Competency Model, except that RIMS subdivides knowledge into three categories, namely, business, organisational and risk management knowledge. Similarly, RIMS distinguishes between management skills and technical skills. The attributes identified by the focus group of this study were similar to those identified by RIMS. However, the focus group emphasised values such as integrity, ethical conduct, respect and accountability. However, unlike RIMS, these were not perceived as one of the five core competencies, but rather as a stand-alone competency in its own right, which risk managers need to be successful. RIMS could consider reviewing its core competencies by allocating three closely related aspects, namely communication, collaboration and consultation to technical skills. Core competencies may be replaced by core values, which are literally at the centre of all the competencies required. Such core values are enhanced by the RIMS Code of Ethics (2019) and significantly contribute to the professionalization of risk management. RIMS could QRFM 12,1 96 Open Rubric also consider providing guidelines to universities for those competencies that could be taught or learnt, to be included in their curricula and to accredit universities who meet such requirements. Social implications-The findings of this study also serve as a starting point for the reintroduction of a BCom (risk management) degree by Unisa. Despite the requirements of the South African Qualifications Authority (SAQA) and the Council for Higher Education (CHE), this study demonstrated that a specialised degree in risk management needs to be offered to meet the need expressed by IRMSA for professional risk managers in Southern Africa, and such a degree should ideally be curriculated based on the competencies identified in this article. The implication for public policy is that SAQA and the CHE need to reconsider their rigid stance about the composition of specialised qualifications, and rather set a range of 33-50% for subjects from the field of specialisation that must be included in the curricula of specialised degrees. As indicated by this research, a combination of subjects from different disciplines is required to enhance the competencies and employability of risk management graduates. Originality/value-The use of IQA is a novel way of ensuring rigour and objectivity in arriving at the required knowledge, attributes, values and skills of risk managers, and aids in the compilation of a new curriculum for an undergraduate qualification in risk management, thus ensuring the qualification will provide a competency-based qualification that will meet the needs of the profession.

Victoria Lemieux

Westford University College

Mathias Mathias

Understand the planning, budgeting, and forecasting concepts of finance management Understand the control of performance management and internal control environment for risk control Understand the financial statement and decision analysis, including risk management Know the shareholder/ corporate value creation, including M&As and disposals Understand the control and management of operational and financial risk in a business

Carolina Lita Permatasari

Financial literacy is an important part of the realization of student management in relation to improving financial literacy so that it creates knowledge and behavior in financial management that has been carried out so far. Students need to realize financial management by increasing financial literacy which is what they learn during lectures. Therefore, students are able to carry out financial management with the existence of financial literacy. This research was conducted at the SWCU FKIP Economic Education using a qualitative method with a snowball sampling technique and with data collection techniques, namely primary data, interviews and documentation, which aims to determine student literacy towards financial management of SWCU FKIP economic education students. The results of this study indicate that students already understand the basics of finance but there are several things that must be underlined in financial literacy, namely knowledge of investment and insurance which is ...

The Journal of Risk and Insurance

Lisa Gardner

abdul khabir rahmat

Due to rapid growth of the world economies in the past few decades, the importance of implementation of risk management into strategy formulation of any type of organizations has been understood by many establishments. The nature of variety of unexpected risks upcoming are increasing due to rapid competition, fast pace technological developments and varying behavior of customers which is difficult even to predict. Educational institutions have not been able to escape from these unpredictable risk components as they also expose to the same amount of uncertainties as other business organizations under the present situation. Implementation of enterprise risk management into business organizations as well as higher education institutions has become popular in the recent past and there have been many research studies carried on the importance of the topic. Many international organizations also have taken the leadership to helping risk managers of organizations under this dynamic atmosphe...

International Journal of Advanced Research (IJAR)

IJAR Indexing

The education which imparts students the expertise to be managers, business leaders or professors in business education is known as Management education. Whenever the issue of Management education is discussed, the discussion hovers around post-graduate management education. The degree of MBA is considered by laymen to be a passport to well-paid jobs with great prospects for advancement. According to a report by ASSOCHAM Education Committee, though MBA aspirants are fleeced by B-schools in terms of charging exorbitant fees, only 7% MBA graduates are actually employable which speaks volumes about the quality of education imparted by such schools. The same report states that around 220 B-schools had shut down in the last two years in the country and at least 120 more are expected to wind up in 2016. Under such circumstances, the question is: how and where will the management degree aspirants get quality management education? This paper is an attempt to assess if this gap in management education can be filled in by undergraduate management education. The paper reviews the aspect of curriculum and pedagogy at undergraduate level and submits recommendations on strategies that will help in the developing and sustaining undergraduate management education in line with contemporary business trends coupled with societal care.

International Journal of Project Management

Ajith Kumar

Education demands changes on a moment basis, as it always is seeking to define or redefine the perfect. Yet Education sector is subject to the least change over time and across the globe. The most likely aim of MBA is creating global leaders, which essentially require flexibility in the curriculum and learning experiences to promote and practice innovation through consistent industry interface. The research objective is on finding the causes of divergences in supply and demand of MBAs in the wake of recession and the long term impact of management restructuring on the potential enrollment of MBAs. Trivial management certifications are no longer attracting genuine entry level MBA jobs. At this point, revisiting the goals and strategies of management education becomes relevant. As the research universe is globally spread, there is little scope of quantitative validation of the relationships. Research is devised as a causal analysis of Management Education followed by a SWOT analysis on Management Education which throws light into the potential future of B-Schools. At the same time, broader scope of management reflected in the inter-disciplinary studies and increasing number of specializations offer wider opportunities to adequately explore and integrate the most modern practices of management in different areas of knowledge. However, these opportunities demand more of diverse skills and dynamic practices, which highlight the importance of an internal audit of resources to match the external opportunities, eventually deriving means to enrich the human capital potential.

Gopalakrishna Vakamullu

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Personal Statement for Msc Banking and Risk

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Please constructively criticize

Personal Statement for Postgraduate study in MSc Banking and Risk.

My fascination with business news on television, coupled with a passionate interest for the economics aspect of my Geography course at GCSE motivated me to study Economics at A Levels. During A levels, my awareness of the broad applications of economic theories to real life increased. This was a motivating factor in my decision to study Economics at University. Through careful considerations of my interests, preferences, abilities and options, I have decided to specialize in Banking by applying for an MSc in Banking and Risk.

At University, I took up the following finance modules; Financial Markets and Institutions in stage 2 and Financial Economics in stage 3. I performed better in the Financial Markets and Institutions module and I believe that this may be down to my choice to write an essay on ‘Banking Regulations and Financial Systems’, out of the four given options as this was the subject area that interested me the most. Although this does not excuse my performance in the Financial Economics module, where I attained a 2:2, I do not believe that my mark in Financial Economics is an accurate reflection of my ability to study Banking and Risk. I am excited at the prospects of studying the banking and risk modules offered at your university, as I strongly believe that it will equip me with the understanding and skills needed to excel in the Banking and Finance industry.

Furthermore, I am also a member of the Finance and Investment Society at my University and have spoken to different finance professionals to help improve my understanding of the different careers in banking and finance. Therefore, I believe that an understanding of Risk combined with Banking will improve my performance in my future career, for example it can enable me to effectively minimize the negative effects which risks may have on the financial result and capital of a bank or business.

If selected, I believe that my hard-working nature, as well as experiences that I have gained on working smartly will enable me to excel academically. Additionally, studying Economics at university has helped develop my mathematical understanding, research skills, essay writing skills, report writing skills, team working skills, presentation skills, excel and SPSS skills. Finance modules have also introduced me to the concept of valuation and different methods of valuation. I will be able to apply these skills and knowledge when required. Nevertheless, I will ensure to have the right attitude to enhancing and learning new skills and will prove myself to be an excellent student. To further prepare myself for the world of Banking and Finance, I have acquired an internship as ‘Finance Directorate Intern’ at International Institute of Tropical Agriculture, where I will be trained on Cash Flow Planning, Asset Management , and Analysing Financial Reports and strategies

Moreover, work related experiences such as performance poetry, founding and leading the International Cooking Society, being a Bloomberg Student Ambassador, Teaching Assistant and Field Marketer, as well as, dealing with unexpected personal health circumstances and a relative’s unexpected health circumstances whilst studying have helped to build the well rounded person that I am today and will assist me in adapting to the self-management and social challenges of being a graduate student.

Last but not least, xxxxxxxxx University is well-respected all over the world by many, including my friends who attend the university and it would be a great opportunity to be taught at your university.

I don't see the spark that took you from studying economics in high school and undergrad, to going into banking and risk. Also, the examples you provide of potential uses for your knowledge of risk and banking are blunt and don't showcase any interest towards these areas or any prerequisite knowledge. You don't provide any rationale for why you got a below par mark in your financial economics module either (connect it to the health issues maybe?). Your last sentence as to why you want to go to X university comes off as an afterthought with no real added value or any statement expressing why this institution and program would be a good fit for you and vice versa. Overall the letter just seems generic and uninspired to me and you just list ideas and events but don't do a good job of connecting them to why this university and this program/subject area is an ideal fit for you. Don't take this personally, this is just my opinion of the letter. Best of luck to you in getting in!

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National Incidence, Outcomes, and Management Strategies for Pre- and Post-Transplant Atrial Fibrillation in Heart Transplant Recipients

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Background: Among heart transplant candidates, atrial fibrillation (AF) is a common comorbidity; however, little is known about the impact of pre-transplant AF on incidence of post-transplant AF or other transplant outcomes. Methods: Adult heart transplant recipients transplanted from 07/01/2012 to 07/01/2021 with data available in both the Scientific Registry of Transplant Recipients and Symphony Health pharmacy databases were included. Recipients were categorized by presence of pre-transplant AF using prescription fill data. Perioperative outcomes and survival out to 5 years post-transplant were compared between those with and without pre-transplant AF. Results: Of the 11,789 heart transplant recipients, 2,477 (21.0%) had pre-transplant AF. Pre-transplant AF was associated with an increased likelihood of pre-discharge stroke (aOR 2.13 [95%CI: 1.07-4.26], p=0.03) and dialysis (aOR 1.45 [1.05-2.00], p=0.02), as well as of post-transplant AF at 6 months (aOR 2.42 [1.44-1.48], p=0.001) and 1 year (aOR 2.81 [1.72-4.56], p<0.001). Pre-transplant AF was associated with increased post-transplant mortality at 30 days (aHR 2.39 [1.29-4.44], p=0.006) and 1 year (aHR 1.46 [95% CI: 1.01-2.13], p=0.04), but similar mortality at 5 years (aHR 1.23 [0.96-1.58], p=0.11). Conclusion: Heart transplant recipients with pre-transplant AF had worse short-term outcomes and increased risk of developing post-transplant AF but comparable survival at 5 years post-transplant. Our findings emphasize the importance of increased monitoring for perioperative complications and highlight the long-term safety of heart transplantation in this population.

Competing Interest Statement

The authors have declared no competing interest.

Funding Statement

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The details of the IRB/oversight body that provided approval or exemption for the research described are given below:

This study has been approved by the Johns Hopkins IRB.

I confirm that all necessary patient/participant consent has been obtained and the appropriate institutional forms have been archived, and that any patient/participant/sample identifiers included were not known to anyone (e.g., hospital staff, patients or participants themselves) outside the research group so cannot be used to identify individuals.

I understand that all clinical trials and any other prospective interventional studies must be registered with an ICMJE-approved registry, such as ClinicalTrials.gov. I confirm that any such study reported in the manuscript has been registered and the trial registration ID is provided (note: if posting a prospective study registered retrospectively, please provide a statement in the trial ID field explaining why the study was not registered in advance).

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