Introduction
The process of risk evaluation is an integral part of an organization’s functioning (Sanders & Wood 2014). The number of risks and their severity, however, may differ significantly based on the environment, in which an organization is supposed to operate. Though the challenges, which a company may face in a local market and in the realm of modern economy, are basically similar, there are certain differences in the overall scale and scope of the specified obstacles. A closer look at the operations of companies in the contemporary economic environment will show that the specified environment incorporates a variety of political, economic and financial influences, which define the further course of firms’ operations. Particularly, the importance of legislative risks, as well as the high possibility for intercultural conflicts, deserves to be mentioned.
Research Questions
- What KPIs are used currently for managing risks for an average entrepreneurship?
- Have the recent changes in the risk management related to the emergence of the modern economy and the related factors shaped the existing risk management strategies?
- What tools for the efficacy of risk management strategies in an entrepreneurship currently exist, and to what extent do they correspond to the KPIs of the 21st century?
- Do the present-day risk management strategies need to be altered so that they could be applied in the contemporary environment and encompass the newly introduced KPIs?
- What changes can be made to the existing risks evaluation strategies so that they could embrace new KPIs and, therefore, promote improvements in the company’s operations?
- What assessment technique should be used by modern organizations so that all KPIs should be taken into account when performing a risk assessment?
Research Objectives
The location of the key performance indicators for risk management can be viewed as the key goal of the study. Among the essential objectives, which will have to be met in the course of the study, the identification of the factors that affect risk management, the areas of risk for project management, the means of measuring the efficacy of specific risk management strategies, etc. will have to be identified. Additionally, the creation of a scale, which will allow for measuring entrepreneurial risks, will have to be viewed as a research objective. The provision of the required instruments for measuring the progress of the appropriate risk management tools can be viewed as the third objective of the paper. As far as the fourth objective is concerned, the study is aimed at reviewing the existing risk management tools so that the best possible model could be designed.
The reasons for linking KPI and the risk management strategy are quite obvious; by identifying the key risks appropriately and addressing them adequately, an organization is likely to have a surplus of resources for enhancing its processes and, therefore, increasing its net profits.
Literature Review
Traditionally, the phenomenon of risk management is defined as the process that requires one to locate the risks that a certain company may be exposed to and to prevent these risks from occurring in a manner as efficient and expeditious as possible (Hopkin 2014). Herein the key problem of locating the essential KPIs for evaluating risk lies; the subject matter is far too broad to be addressed with the help of a single test.
The existing studies show that the Capital Asset Pricing Model (Barberis, Greenwood, Jin, & Schleifer 2014) and the Risk Maturity Model (Hartono & Arini 2014) are traditionally viewed as the essential KPI tests in the environment of modern economy. Much to the credit of their creators, the specified models allow for a rather precise evaluation of the financial risks that an organization may face; however, the fact that they address only one aspect of the risks in question (particularly, the pricing strategy of an organization and the maturity of risks) makes them rather unstable.
Additionally, the fact that the factors such as input and output KPIs, leading KPIs, outcome KPIs, qualitative and quantitative KPIs, etc. (Mahzan & Nazzan 2015) are traditionally used for measuring the overall chances for a company to face certain risks in the modern environment should be mentioned. In spite of their comprehensiveness, the tests that are currently used for defining the risks that a company may face in the contemporary environment cannot be deemed as perfect, as they fail to embrace the changing KPIs, as well as the ones that have recently emerged (Frolick 2015). Therefore, the design of a new test that will help evaluate the company’s performance in a more accurate manner is required.
Research Approach
The study of the existing avenues for measuring the corresponding risk management processes will be carried out on the basis of a mixed research design. Despite the fact that the relations between the key variables of the study can be defined as qualitative, the performance of the corresponding risk management strategies needs to be assessed and, therefore, quantified. Since the principle of quantification lies at the basis of the tools under analysis, the assessment of their efficacy will have to be conducted with the help of appropriate quantitative tools. Hence, the research design needs to be mixed. The tools for data collection such as interviews will be used of retrieving both qualitative and quantitative data. Coding techniques will be used for analyzing the latter, whereas the data including numbers, statistics, etc. will be processed with the help of the linear regression method. As a result, the retrieval of accurate and trustworthy research findings is expected.
Reference
Barberis, N, Greenwood, R M, Jin, L, & Shleifer, A 2014, ‘X-CAPM: an extrapolative Capital Asset Pricing Model’, National Bureau of Economic Research, vol. 19189, no. 1, pp. 1-61
Hartono, B & Arini, W H M 2014, ‘An empirically verified project risk maturity model’, International Journal of Managing Projects in Business, vol. 7, no. 2, pp. 263–284.
Frolick, M N 2015, ‘Business performance management: one truth’, Business Insider, vol. 2, no. 1, pp. 41–48.
Hopkin, P 2014, Fundamentals of risk management: understanding, evaluating and implementing effective risk management, Kogan Page Publishers, Philadelphia, Pennsylvania.
Mahzan, N & Nazzan, N A B 2015, ‘Internal audit of quality in 5s environment: perception on critical factors, effectiveness and impact on organizational performance’, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 5, no. 1, pp. 92–102.
Sanders, N E & Wood, J D 2014, Foundations of sustainable business: theory, function, and strategy, John Wiley & Sons, New York City, New York.