What is your Philosophy of Risk

It is very important to get the philosophy of risk followed by a financial organisation right. Else as a risk manager one could be labelled as anti-business. Risk manager must present the concern-case in a manner so that business understands clearly in light of its own objectives – what may go wrong and how likely its to happen, what has been done so far to manage the risk. What additional efforts are required to bring the risk to a level within business’s risk appetite (hopefully your business does have rational risk appetite statements).

Philosophy of risk followed by an organisation is not explicitly defined in any policy or procedure documents of an organisation but is based on analysis of its Risk Policies, Governance style, Culture, Risk appetite statements & Business mission.

However here I would like to share a very pragmatic and practical Chinese concept of risk which is represented by two characters which translate as “danger and opportunity”. In fact, the characters for crisis (rather than danger) are wei ji (危机) and the characters for opportunity are ji Hui (机会), so it is it is probably truer to say that he character ji forms part of the concepts for crisis and opportunity, which still shows that conceptually the Chinese understood the twin sides of risk many centuries ago.

weji

Loss of one or more key staff, loss of reputation or abandoning a project may well have an adverse financial impact, but even then it is possible that such risk events can result in financial benefit both in the short and medium term. When something happens, it may even help you to achieve and surpass your objectives. Objectives which are comprise of  Sales, profits, growth, market share or something else like, people risk. Discipline of risk management will mean that you are prepared as much for the upside as for the the downside. Risk is not downhill all the way, even if it often fells that way.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s