Strategy and Risk Management

2

The WHAT of Risk Management

“I wish I had looked before I leapt. If I had, I might not be so deep in debt and unemployed!” Peter G.

I travelled to Phoenix, Arizona, to meet with the entire team of 67 talented people who managed PJ Investments’ (PJI’s) diverse business portfolio. In an air-conditioned, recently remodelled conference room, I spent the better part of a day explaining to them what risk management was all about for their organisation.

I briefly discussed the definition of risk management in the previous chapter, but now I will go more in depth.

What Risk Management Is

Risk management is the process of identifying, prioritising and mitigating the impact of unforeseen events. It is a form of proactive contingency planning designed to avoid difficult situations or to prepare your organisation for undesirable consequences. It is a process for lessening the negative impact of choices you make while acknowledging Murphy’s Law.

Daily you face innumerable risks, and the function of risk management is to address the most critical ones that can disrupt your organisation, harm its business model or negatively impact any of your numerous stakeholders. Risk management encompasses both financial risks and everyday business risks. Critical risks are those that are integral to conducting business or that threaten your business’s continuity. Their potential costly impact requires that they receive special attention and that you devote resources to managing them.

Risk management is ...