Riskmanagement provides a framework for assessing opportunities for profit, as well as for gauging threats of loss. Without measuring risk, we cannot ascertain what action of the available alternatives the enterprise should take to optimize the risk-reward tradeoff. The risk-reward tradeoff is essentially a cost- benefit analysis taking uncertainty into account. In (economic) marginal analysis terms, we want to know how many additional units of risk we need to take on in order to get an additional unit of reward or profit. A firm, for example, wants to know how much capital it needs to keep from going insolvent if a bad risk is realized.  Indeed, if they cannot measure risk, enterprises are stuck in the ancient world of being helpless to act in the face of uncertainty. Risk metrics allow us to measure risk, giving us an ability to control risk and simultaneously exploit opportunities as they arise. No one profits from establishing the existence of an uncertain state of nature. Instead, managers must measure and assess their enterprise’s degree of vulnerability (risk) and sensitivity to the various potential states of nature. After reading this chapter, you should be able to define several different risk metrics and be able to discuss when each metric is appropriate for a given situation.
enterprises must properly coordinate the internal control departments. In order to improve the efficiency of the enterprise development, small accounting units will be used, so that all departments and individuals will start internal control and riskmanagement in their own interests. At the same time, due to the imperfect concept of internal control and riskmanagement, many departments are difficult to take the gains and losses of the overall interests of the company as the starting point in the implementation of the internal control system. This has led to a lack of coordination in the development of various departments, which has caused the internal control objectives of enterprises to deviate from the actual control. As the core of internal control, the finance department can only reflect the actual operation results of the enterprise, and it cannot manage the internal control situation before and during the event, which leads to the improper or inappropriate
Riskmanagement has been identified as a vital process in the business institutions despite being less developed within the small business sector. Many developed countries record a time in history when pment. This means that management of Operational Risk in Small and Medium Enterprises in developing countries and more so in Kenya can also lead to high economic development. It has been generally observed that most Small and Medium ot survive to their fifth birthday (Hallberg, 2000) hence raising concern on their general performance. This article therefore investigates the effects of Operational RiskManagement (ORM) practices on the performance of Small and Medium Enterprises. A cross- sectional survey design was adopted to establish the relationship between the key study variables. The primary data used in the analysis is based principally on a stratified random sample of 100 Small and 015 in Kakamega Town. A range of secondary data sources served as the key bibliographic tools for identifying relevant work for review. Multivariate regression analysis was used to test the effect of the Operational RiskManagement practices on the ance of Small and Medium Enterprises. The results show that there was a statistically significant positive effect of Operational RiskManagement practices on the performance of Small and Medium Enterprises (overall beta value of 0.621 and significant). Given that there is a positive Small and Medium Enterprises for instance, conducive environment in which the Small
Small and Medium Enterprises (SMEs) in both developing and developed economies play crucial roles in economic development through wealth creation, employment opportunities and poverty alleviation. However, the uncertainties surrounding businesses require SMEs to effectively manage their risk exposures. This study examined the influence of riskmanagement practices on the performance of SMEs in Osun state, south-western Nigeria. A total of 340 SME operators in the state were chosen for this study and primary data were collected through a structured questionnaire which was administered to managers/operators of the selected SMEs. A total of 330 copies of the questionnaire were returned having been correctly filled and deemed suitable for this research. A linear regression model, through the Ordinary Least Squares technique was used for the data analysis and test for hypothesis, with the aid of the E-view statistical software. The result from the analysis revealed a significant relationship between riskmanagement and the performance of SMEs (t-value=23.47; p<0.05). The result further showed that attitude to risk positively affects riskmanagement practices and that there is a strong positive correlation between risk identification and riskmanagement (r=0.92). The study therefore concluded that riskmanagement practices have significant and positive influence on the performance of SMEs in Osun state. It was recommended that SME operators in Nigeria should put in place cost-effective measures for timely risk identification and effective risk mitigation in order to ensure that their financial performance is not negatively impacted.
Before the official recognition of Small, Medium and Micro Enterprises (SMMEs) in South Africa during the mid-1990s, these business entities have been key players in the stimulation of the national economy. Albeit their socio-economic value added, prior research shows that the sustainability of these business are among the worst in the world, since approximately 70% of South African SMMEs fail within their first three years of existence. This dispensation is often blamed on inter alia, their inadequate management of economic factors which, in turn, cultivates risks. Notwithstanding the fact that most South African SMMEs make use of customised riskmanagement initiatives, previous research shows that these initiatives are not deemed as adequate and/or effective to mitigate risks. Since the manner in which risks are managed are strongly dependent on the attitude and awareness of its management surrounding internal control (control environment), this study focused on investigating whether the control environment was used as foundation to implement their customised riskmanagement initiatives. Empirical research was conducted whereby primary quantitative data were collected from respondents through the deployment of a questionnaire, through means of non-probability sampling methods. The results showed that though the control environments of South African SMMEs were regarded as good, they were not used as foundation by South African SMMEs to implement their customised riskmanagement initiatives.
It is useful to highlight another important observation that relates to the complexities of today’s global business environment which undoubtedly brings about the change in terms of risk being perceived, notably so when risk is now considered and managed in a portfolio-bias in order to create value. Thus, RiskManagement, as a structured response to risks, has been recognized as a vital component for companies and organizations especially business enterprises to achieve eventual success. Such a view is well supported by a statement made by Crockford (2005, p.5) which emphasizes that “risk can be considered as a function of change, and RiskManagement may thus be described as a technique for coping with the effect of change.”
According to Kapcio (2011:10), “today, there is a high correlation between social media riskmanagement and effective employee communication”. Due to the nature of various risks posed by social media, enterprises face the challenge of identifying opportunities for the IT functions to be engaged in covering the gaps (Ernst & Young, 2012b). Research shows that it is more important to be aware of and manage risk rather than try to avoid risk altogether because that is costly, frustrating and impossible (Shih, 2009). It is , therefore , important for discussions to be held internally on both the positive and negative implications of social media, and on an overall riskmanagement plan to be put in place which defines how to address the many diverse exposures through social media (Hegel, 2011:56).
Since this study looks into SMEs’ hedging strategy made by managers, which is partly and at times fully subjective, perceptual measures will be an appropriate method. As mentioned earlier, Ketokivi and Schroeder (2004) claim that objective measures are unlikely to be as appropriate as perceptual measures for those measures which concern the cognitions of individuals and organizations. Indeed, much of the riskmanagement literature discusses outcomes that exist in the cognitions of individuals and organizations. Conceptualizing organizational strategy, scholars (e.g., Ginsberg, 1984; Ginsberg & Venkatraman, 1985; Venkatraman & Grant, 1986) are concerned about measurement reliability and validity. To assess the reliability and validity of perceptual measures developed by Miles, Snow, Meyer, & Coleman Jr (1978), Shortell and Zajac (1990) have used both archival and perceptual data from two time periods and found that prediction using perceptual data is the same as prediction using archival data. In summary, on the basis of studying an overarching model of a firm’s forex riskmanagement (specifically, influences on hedging strategy), the use of perceptual measures in this study is an appropriate approach. First, perceptual measures aim to capture firms’ environment from the perspective of organizational members. Second, they are able to reflect the current state of the firm's environment. Third, perceptual indicators are preferred to financial ones as the latter is subject to accounting systems, the capital structure and a number of other factors. Fourth, informants are more likely to respond to perceptual questions than to disclose archival data. Fundamentally, this is a study about firms’ financial behaviours that are largely influenced by individual cognitions; hence the use of perceptual measures is the most appropriate option. In order to address potential limitations on using perceptual measures, all of the measurement scales used in this thesis will be tested for reliability and validity, as outlined in Chapter 6.
The study established that risk assessment in enterprises influence project performance to a very great extent. To successfully maintain enterprises, there has been a comprehensive, broad based approach that is widely understood and used regularly to clearly articulate where risks and opportunities exist throughout the enterprises. Realistic project risk control was achieved influencing project success, risk assessment influences acquisition of risk mitigation of project risks and that risk evaluation influence information sharing on riskmanagement leading to completing software development in time. Assessment of project risks influence avoidance technique, the communication on risks facing enterprises is effective, assessing time available for the IT project reduce project risks and that through assessing risks facing the enterprises, informed reports are generated on effective riskmanagement leading to successful website designing. The study established that the level of project risk identification as carried out in the enterprise was high, as it was found that specific actions are identified to enhance the riskmanagement activities on each significant risk. Enterprises facilitated a distinctive risk identification effort as they undertook risk identification for the purposes of mitigating risk facing projects to a very great extent. It was very important for riskmanagement function is established throughout the whole enterprises and insuring against financial loss and develop riskmanagement strategy to allocate resources efficiently and influence less costing of the project. Risk registration influenced identification and management of project risk, use of checklist, risk controls and screening of project risks and taking measure enhance risk identification in small and medium technology firms to a very great extent.
There is the risk of all activity that we take part in, it is found everywhere and spreads through every issue of life . In the global business environment, unexpected situations create severe loss exposures . In a typical small and medium enterprise environment, where access to capital is limited a sudden change of events could likely lead to operational activities being interrupted, financial loss and even bankruptcy . It is therefore important to have in place effective measures to counter such events. The practice of riskmanagement in small and medium enterprises (hereinafter SMEs), especially small firms is usually determined by the attitude to risk and the beliefs of the owners . There is an informal approach to the implementation of riskmanagement procedures, decisions are made in relation to the status of their business as a unit while ignoring techniques to manage risk . These decisions are linked irrevocably as the strategic decision made by owner-managers reflecting the management of risk they face .
From this point of view, the perceived legitimacy of authorities disclosing information is another key issue in the adoption of the adapted risk behaviours by individuals (Ballantyne et al. 2000; Dahlstrom et al., 2012). Then, to compel the population to follow the authorities’ recom- mendations and to adopt the appropriate behaviours in case of a disaster, the information should take into account the level of legitimacy they get for the authorities in charge of riskmanagement (Cvetkovich 1999). The methods used in Social Sciences can then be useful in the understanding of behaviours and practices (Barberi et al. 2008; Bickerstaff 2004; Brilly and Polic 2005; Drori and Yuchtman-Yaar 2002; Drottz-Sjöberg 1993; Finlay and Fell 1997). They can be adapted to understand the attitudes for populations exposed to a major risk such as lahars. As other natural hazards such as volcanic eruptions, the con- sequences of lahars are unpredictable and are important both on the population and the infrastructures (Vargas Franco et al. 2010). In this context, the present contribu- tion focuses on the assessment of subjective judgement of individuals (living in risk-prone areas) on natural hazards and disaster, in order to answer the main question: how can we qualify the link between representation, information and behaviours? Three hypotheses will be tested: (1) the
The implementation of Enterprise RiskManagement (ERM) is vital for all types of organisation including the small and medium enterprises (SMEs). Thus, the objective of this study was to examine perception of the ERM framework among SMEs in Malaysia, and to analyse its effect on sales performance. ERM is becoming an issue of high concern among organisations. This is because it is hailed as one of the most important framework to provide a clear direction and guidance in managing the risks of enterprises, so that the organisation is able to minimise risk and losses. In this study, a survey of one hundred and fifty-two (152) SMEs was conducted and the data was analysed using regression analysis. This study found that SMEs focus heavily on the “control environment” and “risk appetite” components. These two (2) components were ranked as the top ERM framework by SMEs in Malaysia. The Regression result suggests that “assessing riskmanagement”, “control activities”, “information and communication” and “monitoring” components proved to have a significant effect on sales. This paper further contributes to knowledge development on ErM framework and the influences of its components on sales performance from a dynamic capability perspective of SMEs. SMEs should primarily consider the influence of dynamic capabilities and changing resources in their organisations when practising ERM for its survival.
To begin with, the developed list of OHS riskmanagement maturity measurable indicators is not exhaustive. The limitations of the qualitative aspect of the proactive indicators also need to be considered. Both their implementation and their use are subject to major constraints. Next, it must be noted that the preliminary model developed suggests no particular formula either for weighting or for quantifying the indicators. This choice will give more flexibility to researchers and practitioners to develop mathematically supported tools specific to them and according to their vision. In this case, experts will be more able to adapt the proposed model to their context. Appropriate tools for enabling the indicators (e.g., a questionnaire) remain to be identified. Model examination and validation in the SME context will require case studies, after completing the development of the supporting mathematics. Validation will be possible only insofar as sufficient amounts of data are collected and found reliable based on validated tools and found to reflect accurately the reality of the riskmanagement practices of the SMEs involved in the exercise.
This study concentrates on the examining of the existence of the ERM implementation preconditions that are suggested by the prevailing ERM related literature and examining the influence of the level of ERM implementation on the firms’ access to debt finance. The study is conducted in the context of Finnish small and medium-sized enterprises (“SME”). The existence of preconditions of size, sector and ownership is suggested by numerous previous studies (Liebenberg & Hoyt 2003; Golshan & Rasid 2012; Paape & Speklé 2012; Brustbauer 2016). Size of a company enables the resources to implement more systematic management accounting systems. The costs affect the decisions whether the benefits of a control justify the costs and whether one or another form of control should be implemented (Merchant 1998: 212), therefore the costs of implementing ERM systems in relation to company size is one of the main arguments against not implementing or even planning to implement one. Size is typically very significant determinant of ERM implementation, even in the European context (Bertinetti et al. 2013). Sector of the firm is evidently seen as one of the predeterminants of an ERM implementation (Paape & Speklé 2012; Brustbauer 2016). Majority of the previous research finds that heavily regulated financial sector (i.e. banking, insurance, financial services and investment companies), energy sector and “highly competitive” sectors are most frequently implementing the ERM systems as measured by ERM surveys and existence of chief risk officers (CROs) in the business organizations (Colquitt, Hoyt & Lee 1999; Kleffner, Lee & McGannon 2003; Beasley, Clune & Hermanson 2005; Beasley, Pagach & Warr 2008; Pagach & Warr 2011; Ahmad, Ng & McManus 2014). Golshan and Rasid (2012: 278) also contend that telecommunication industry is also more likely to adopt ERM framework. The conclusions can be drawn from the fundamentals of institutional theory that suggests that peer groups tend to imitate others and act according to the rules and regulations of their respective industries.
Determining of the risk profile that has an effect on the “risk exposition” in certain period of time is of a great significance for reaching an effective riskmanagement. Defining the separate risk groups, specific risks as well as their potential effect – their probability and consequences connected with the logistic activity, afford an opportunity for defining the target risk profile or the so called “desired” risk profile. This determining will be connected with the risk appetite, the set goals, the method of management etc… For instance, if we look at logistic macro-model that consists of three main components – supply, manufacturing and distribution, we can define the four main group risks – business environment, consumers, products and services , raw material suppliers( fig.3).
In our example, applying the four security controls mentioned above reduces the risk considerably, but there is still some residual risk: for example the unavailability of the notebook until it is replaced or the possibility that the encryption system used for disk encryption might be broken. Nevertheless, as in the first instance the possible impact is relatively small, and in the second one the probability that this happens (i.e. that the underlying encryption system is broken) is very small, the risks will probably be accepted. • Risk communication: consists of informing decision makers and involved stakeholders about
First need, to account for the complete risk setting within which the financial institutions operate should be assessed. The external environment involves: the political and regulatory conditions, economic drifts, social and legal tendency, natural calamities, consumer behavior and competitors. The enterprise's internal environment involves: growth and diversification plans and programs, the organizational culture, delivery systems, the appetite for risk, people competencies and intellectual capital, work processes and technology. The above-mentioned are all the part of the financial risk and can be also included in other organizations than financial ones. The strategies are also aligned and set by these external and internal risk factors.
unanticipated infectious diseases. While disease agents and the infections they produce vary, they all have one thing in common: the animal must be exposed to them to develop disease. Once it is understood that different diseases can be acquired orally and others are breathed in via aerosol transmission, it is easier to gain control over them. This classification system is effective and easy to understand without requiring knowledge about a wide range of diseases. From a management standpoint, it may be easier to identify risk areas, such as fomites, and then design protocols to minimize exposure. Disease agents can be spread from animal to animal, or animal to human, through a variety of transmission routes. Biosecurity/BRM considers five main routes: aerosol, direct contact, fomite, oral and vector-borne. The sixth route, zoonotic, can be spread from animals to humans through one of the five previously listed routes. Many infectious agents can be transmitted by more than one route of infection.