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The Essentials of Risk Management Essay

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Updated: Sep 8th, 2021

For successful performance, justice and security organizations need an effective risk management system that consists of control activities and effective resource allocation to achieve the overall objectives of the company. Strategic vision and planning, risk assessment, and analysis are important elements of any management. The development of effective risk management becomes important in the maintenance of human relationships and ensuring the physical well-being of employees so that they give the maximum contri­bution to efficient working.

Risk management is a broad concept which involves business operations in an enterprise. Risk is defined as ‘uncertainty of financial loss, the variations between actual and expected results, or a probability that a loss has occurred or will occur (Broder 2002, p. 1). Risk can be explained as the very acts of using equipment, maintaining an order processing system, hiring new personnel, packing items to be shipped, accepting the financial decision, and developing strategic plans create risk. Risk management implies uncertainties and threats which can weaken organizational positions of the market and harm organizational performance. The main categories of risks are “personal, property and liability” (Broder 2002, p. 1).

The importance of risk management for justice and security organizations s explained by the ability of a company to reduce and minimize a possible financial loss and improves its performance. Risk analysis consists of three main elements: risk assessment, management communication (Sennewald, 2003). There are cases in which risk analysis can reduce risk by uncovering the previously unknown cause and improve relationships. In many organizational situations, risk analysis is approached by searching for correlations between variables that are suspected of influencing each other. Risk assessment analysis helps to identify the overall stability of the environment or decision-making. Also, it allows managers to take into account change and possible limitations of their estimates (Sennewald, 2003).

Some of the dependent vari­able data in the forecast may be significant and may be sensitive to variations in forecasted values of other independent variables. Injustice systems, risks, and unexpected incidents prevention have become an urgent need from the standpoint of national safety (Sennewald, 2003). Unlike corporate management issues where the manager can step back away from the table and do a re-assessment of the situation based on the data presented, justice and security organizations do not have that option. For this reason, justice and security organizations view risk management as a bridge between theory and practice which helps them to eliminate risks to services and business activities. Even seemed insignificant element of data that is missed or resource not assigned, a division or task force assigned to the wrong area or not tracked properly has resulted in catastrophic consequences for business activities (Crouhy et al 2006; Broder 2002).

Risk analysis is defined as “a management tool, the standards for which are determined by whatever management decides it wants to accept in terms of actual loss” (Broder 2002, p. 2). The main advantage and importance of a properly performed risk analysis are that it helps managers to predict changes and avoid threats. The best way to anticipate change is to carry out a risk analysis. With risk acceptance, managers recognize that the organizational environment is filled with risk and that they need to learn how to live with it. So when managers carry out risky initiatives, they establish contingencies to deal with troublesome consequences (Broder 2002). For example, many organizations in this sphere are notoriously risky because people have little foreknowledge of what will happen to them. To deal with unfortunate possibilities such as cost overruns and schedule slippages, managers set aside contingencies to cover their possible occurrence. Without risk analysis, justice and security organizations could not overcome possible threats and anticipate coming changes. “Risk analysis provides management with information on which to based decision” (Broder 2002, p. 2). If the organization is dealing with untried technology, if it is being supported by a cost-reimbursable contract, or if the client organization is in turmoil, the organization will likely experience substantial change. Risk analysis plays a crucial role in organizational performance and management because it helps managers develop risk avoidance techniques. In other words, the benefit of risk analysis “is to strike an economic balance between the impact of risk on the enterprise and the cost of implementing prevention and protective measures” (Broder 2002, p. 2-3).

External risks are difficult to eliminate or avoid, but they have a profound impact on the organization and its result. Internal risks have a great impact on the organization and its success, but they can be easily eliminated and avoided. Achieve the task requires clear definition, good planning, clear roles and responsibilities, appropriate resources, and regular reviews as the project proceeds (Sennewald, 2003). There is even evidence that, despite the formal utilization of quantified cost-benefit approaches, the practical implementation of safety and quality may be achieved by informal means. A new or changed design can be costly, as it may need new tools, or a new layout of works, and employees may have to be retrained. The quality policy must be formulated in terms a designer can understand and act upon. All risks are interrelated which has a great impact on the organization and its performance. To produce or provide these items to a required quality level, at an appropriate time and within acceptable financial constraints, organizations create several functions that are essential (Crouhy et al 2006). The main problem is that not all the risks can be eliminated or avoided (e.g. contractor delays or the rising cost of raw material). In this case, the role of the manager (and key employees) is to predict and plan possible time and cost constraints.

In sum, risk management may help to reduce the uncertainty of the future and hence are valuable. Risk management is an important area of justice and security organizations because it helps them to locate and plan resources taking into account probability analysis and possible risks. Ineffective risk analysis leads to failure of the performance and threatens its outcome.

References

  1. Broder, (1999). Risk Analysis and the Security Survey. (2nd edition). Butterworth-Heinemann; 2 edition.
  2. Crouhy, M., Galai, D. Mark, R. (2006). The Essentials of Risk Management. McGraw-Hill Professional.
  3. Sennewald, C.A. (2003) Effective Security Management, Butterworth-Heinemann; 4 edition.
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