Running head: RISK MANAGEMENT TECHNIQUES
Week four assignment: Risk management techniques compared and evaluated
Name
BUS 401 Principles of Finance
Instructor James York
July 15, 2013
1
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Risk Management Techniques
According to Walter (2012), the risk management entails a process of evaluating overall
goals of an organization’s against risks attached to planned activities. To achieve this
component in running of a business, measures have been devised to identify and analyzed the
uncertainties associated. This paper discusses the techniques devised by Dr. James Kallman, in
comparison to those of other risk management experts.
Kallman observes that risk management is decision making process that combines a
number of processes in the business operations (Kallman, 2005). Risk management involves;
organizing, planning, controlling, leading and allocating resources. The technique by Kallman is
seen as one that leverages the risk manager to have the foresight on to the target path in
operations. It offers a guide to the organization in achieving its goals by minimizing derailing
obstacles to an organization’s success path.
Risk managers are expected to make decision relevant to an organization’s success path
relating to the available resources. The decision making process is arrived at through successive
analysis and evaluation of the organization’s resources, internal and external environment, the
goal and likely and unlikely risks involved. This level of analysis and evaluations opens the
organization’s perspective to embrace the ideal measures to attain its objectives.
Process as risk management technique provides a guide to the realistic actions to take
towards set goals. The process involves risk managers participation in overseeing possible
outcome in segmented process that allows for flexibility desirable where the environment is
dynamic and subtle. Risk managers are expected to engage proactively in order to avoid
haphazard action taking. The process technique is similar to Jegher’s financial risk management
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strategy that looks in to the likely impact of various steps taken. It advocates for realistic steps in
approaching target goals.
The goals in these two measures are observed to re-align the target actions to reflect
changing condition with a plan that is predictive to the target goals. This technique guarantees
that the decisions and actions taken will not be hampered by changing condition. They will also
not require uncoordinated face saving measures in the organization’s operations.
Goal setting serves to provide focus to operations within an organization setting an aspect
of shared culture and cohesively bring together the organization’s resources. Goal setting is
achieved through planning where goals are communicated and resources to achieve them are
made available. Risk management according to Mikes (2008) requires the planning technique in
order to increase chances in their attainment. The planning process also highlights the
organizations potential towards meeting the objective.
Organizing technique serves to supplement the planning technique through delegating
role to team members and availing resources. The risk management perspective of every
organization can only achieve efficiency in meeting set goals by organizing the available
resource to their optimal use. A process that has been organized optimally is likely to realize set
targets with desired accuracy as opposed to one that no organizing aspect (Jegher, 1999).
Kallman technique in organizing incorporates the organization’s internal and external
resource person. These techniques appreciate that the internal resources and man power is not
sufficient to ensure comprehensive operation. The incorporation of external resource persons
adds objectivity as well as set in a broader perspective in operations (Jegher, 1999).
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To set in a sense of direction leadership technique is incorporated in risk management by
Kallman. The harnessing of appropriate leadership skills is desirable since the teams need to be
motivated and dedicated to attainment of the set goals. Leadership will be able to anticipate
likely objections to changes needed for the targets and mediate where conflict is likely to arise.
The measure sets in a sense of tolerance as is expected of an ideal leader where risk is to be
averted. Good leadership will yield a focused perspective towards set goals and dedication from
team members even where difficulties are seen to be looming in the horizon.
Control is achievable through measurement of activities undertaken and the step-by-step
results realized (Mikes, 2008). This technique gives the process of risk management ability to
overlook performance and re-orient planned measures. Through the reports, risk managers are in
a position to identify measures that need to be steeped up and process that need to be dropped
given the projected outcomes
Resource allocation techniques serve to reduce wastage and ensure optimality of
operation. Risk management core target is to reduce the organization’s losses and optimal
resource allocation guarantees this perspective. Risk managers according to Mikes (2008) face
the challenge of attaining a balance of resource inadequacy against the high level needs of their
programs. This challenge is resolved through planning guided by prudence in resource
allocation.
A more complete measure to understanding how a risk is a today’s business operation
concern is seen in Kallman’s risk management techniques. Kallman’s assertions are related to
the acceptable measures of decision making in an organization.
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Reference
Habib, A. (2006). Information risk and the cost of capital: Review of the empirical literature.
Journal of Accounting Literature, 25, 127-168.
Jegher, S. R. (1999). Flexible structure: Managing financial risk. Risk Management, 46(1), 2933. Retrieved from
http://search.proquest.com/docview/226993593?accountid=32521eference
Kallman, J. (2005). Managing risk. Risk Management, 52(12), 46 Retrived from,
http://search.proquest.com/docview/227002247?accountid=227032521.
Mikes, A. (2008). Risk Management at Crunch Time: Are Chief Risk Officers Compliance
Champions or Business Partners? Rochester, New York.: Harvard Business School.
Walther, (2012). Principles of Accounting: Volume I. San Diego, CA: Bridgepoint Education,
Inc., San Diego, CA.