Risk management is the identification, assessment, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives) followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities. The strategies to manage threats (uncertainties with negative consequences) typically include transferring the threat to another party, avoiding the threat, reducing the negative effect or probability of the threat, or even accepting some or all of the potential or actual consequences of a particular threat, and the opposites for opportunities (uncertain future states with benefits). Introduction A widely used vocabulary for risk management is defined by ISO Guide 73, "Risk management. Vocabulary. Risk management also faces difficulties in allocating resources. Method Principles of risk management Risk management should: Process
Related: Finance of replenishment & stewardhip
• 4. Preventing Failure - Risk Management
Minimize capital accumulation"Capital-building" redirects here. For the headquarters of the European External Action Service, see Triangle building. In a more broad sense, capital accumulation may refer to the gathering or amassing of any objects of value as judged by one's perceived reproductive interest group. Definition The definition of capital accumulation is subject to controversy and ambiguities, because it could refer to: a net addition to existing wealtha redistribution of wealth. Most often, capital accumulation involves both a net addition and a redistribution of wealth, which may raise the question of who really benefits from it most. In economics, accounting and Marxian economics, capital accumulation is often equated with investment of profit income or savings, especially in real capital goods. and by extension to: The measurement of accumulation Harrod–Domar model In macroeconomics, following the Harrod–Domar model, the savings ratio ( ) and the capital coefficient ( ) is: .
ISO 31000ISO 31000 is a family of standards relating to risk management codified by the International Organization for Standardization. The purpose of ISO 31000:2009 is to provide principles and generic guidelines on risk management. ISO 31000 seeks to provide a universally recognised paradigm for practitioners and companies employing risk management processes to replace the myriad of existing standards, methodologies and paradigms that differed between industries, subject matters and regions. Currently, the ISO 31000 family is expected to include: ISO 31000:2009 - Principles and Guidelines on ImplementationISO/IEC 31010:2009 - Risk Management - Risk Assessment TechniquesISO Guide 73:2009 - Risk Management - Vocabulary ISO also designed its ISO 21500 Guidance on Project Management standard to align with ISO 31000:2009. Introduction ISO 31000 was published as a standard on the 13th of November 2009, and provides a standard on the implementation of risk management. Scope
Managing Risks: A New FrameworkEditors’ Note: Since this issue of HBR went to press, JP Morgan, whose risk management practices are highlighted in this article, revealed significant trading losses at one of its units. The authors provide their commentary on this turn of events in their contribution to HBR’s Insight Center on Managing Risky Behavior. When Tony Hayward became CEO of BP, in 2007, he vowed to make safety his top priority. Among the new rules he instituted were the requirements that all employees use lids on coffee cups while walking and refrain from texting while driving. In this article, we present a new categorization of risk that allows executives to tell which risks can be managed through a rules-based model and which require alternative approaches. Managing Risk: Rules or Dialogue? The first step in creating an effective risk-management system is to understand the qualitative distinctions among the types of risks that organizations face. Category I: Preventable risks. Category II: Strategy risks.
Revalue Future valueOverview Money value fluctuates over time: $100 has a different value than $100 in five years. This is because one can invest $100 today in a bank account or any other investment, and that money will grow/shrink due to interest. An investor who has some money has two options: to spend it right now or to invest it. Therefore, to evaluate the real worthiness of an amount of money today after a given period of time, economic agents compound the amount of money at a given interest rate. The operation of evaluating a present value into the future value is called a capitalization (how much will $100 today be worth in 5 years?). It follows that if one has to choose between receiving $100 today and $100 in one year, the rational decision is to cash the $100 today. Simple interest To determine future value (FV) using simple interest (i.e., without compounding): Compound interest To determine future value using compound interest: 6% per year with half a year as compounding basis
Enterprise risk managementEnterprise risk management (ERM) in business includes the methods and processes used by organizations to manage risks and seize opportunities related to the achievement of their objectives. ERM provides a framework for risk management, which typically involves identifying particular events or circumstances relevant to the organization's objectives (risks and opportunities), assessing them in terms of likelihood and magnitude of impact, determining a response strategy, and monitoring progress. By identifying and proactively addressing risks and opportunities, business enterprises protect and create value for their stakeholders, including owners, employees, customers, regulators, and society overall. (ERM) ERM can also be described as a risk-based approach to managing an enterprise, integrating concepts of internal control, the Sarbanes–Oxley Act, and strategic planning. ERM frameworks defined Casualty Actuarial Society framework Hazard risk Financial risk Operational risk
10 Golden Rules of Project Risk ManagementThe benefits of risk management in projects are huge. You can gain a lot of money if you deal with uncertain project events in a proactive manner. The result will be that you minimise the impact of project threats and seize the opportunities that occur. This allows you to deliver your project on time, on budget and with the quality results your project sponsor demands. Also your team members will be much happier if they do not enter a "fire fighting" mode needed to repair the failures that could have been prevented. This article gives you the 10 golden rules to apply risk management successfully in your project. Rule 1: Make Risk Management Part of Your Project The first rule is essential to the success of project risk management. Rule 2: Identify Risks Early in Your Project The first step in project risk management is to identify the risks that are present in your project. Are you able to identify all project risks before they occur? Rule 3: Communicate About Risks Rule 7: Analyse Risks
Minimize rent-seekingIn public choice theory, rent-seeking is spending wealth on political lobbying to increase one's share of existing wealth without creating wealth. The effects of rent-seeking are reduced economic efficiency through poor allocation of resources, reduced wealth creation, lost government revenue, national decline, and income inequality. Current studies of rent-seeking focus on the manipulation of regulatory agencies to gain monopolistic advantages in the market while imposing disadvantages on competitors. Description Georgist economic theory describes rent-seeking in terms of land rent, where the value of land largely comes from government infrastructure and services (e.g. roads, public schools, maintenance of peace and order, etc.) and the community in general, rather than from the actions of any given landowner, in their role as mere titleholder. In many market-driven economies, much of the competition for rents is legal, regardless of harm it may do to an economy. Examples
Corporate governanceThere has been renewed interest in the corporate governance practices of modern corporations, particularly in relation to accountability, since the high-profile collapses of a number of large corporations during 2001–2002, most of which involved accounting fraud. Corporate scandals of various forms have maintained public and political interest in the regulation of corporate governance. In the U.S., these include Enron Corporation and MCI Inc. Other definitions Corporate governance has also been defined as "a system of law and sound approaches by which corporations are directed and controlled focusing on the internal and external corporate structures with the intention of monitoring the actions of management and directors and thereby mitigating agency risks which may stem from the misdeeds of corporate officers Principles of corporate governance Corporate governance models around the world There are many different models of corporate governance around the world.