Being smart about risk taking is important. Risk taking doesn’t have to be risky. Organizations and businesses need to take risk to be successful. Playing it safe is not an option for many businesses in the competitive world.
Risk versus. reward is the oldest game in business, investing and life. Without risk, there is no reward. Most risk management systems aim to avoid risk. But, if a business doesn’t take risks, it can’t grow. Enterprises must understand the risks they choose to take and manage them successfully.
Effective risk management does not happen automatically. Managers who aspire to enable their organizations to be good at managing risk must recognize that the road to effective risk management is long, twisting, and occasionally hazardous. Beginning the journey is not difficult. It may be triggered by a one-page directive issued by the chief operating officer following a small disaster, exhorting the organization to implement good risk management practices. But after the initial hoopla, the journey toward effective risk management becomes challenging.
Failure to adequately manage risks faced by an organization is generally due to inadequate risk recognition, insufficient analysis of signifi cant risks and failure to identify suitable risk response activities. Also, failure to set a risk management strategy and to communicate that strategy and the associated responsibilities may result in inadequate management of risks. It is also possible that the risk management procedures or protocols may be flawed, such that these protocols may actually be incapable of delivering the required outcome. The consequences of failure to adequately manage risk can be disastrous and result in inefficient projects and operations that are not completed on time and strategies that are not delivered or were incorrect in the first place.