Yes, you CAN manage risks in a comprehensive, scientifically meaningful way that produces risk-adjusted returns with minimal surprises!
However, to do so, you must be aware of the difference between risks we take and risks we face?
Both risks we take and risks we face address opportunities as well as risks but the process and participants are different and must be addressed differently.
The framework and processes we will describe for effective, enterprise risk management will be:
o Responsive to top management.
o Incorporate data and judgments from people throughout the enterprise as well as subject matter experts.
o Communicate and coordinate risk management across the enterprise.
o Provide a meaningful measure of the VALUE of an organization’s objectives.
o Lead to competitive advantage by optimally allocating resources to produce optimal risk-adjusted returns on investments commensurate with top managements’ risk appetites.
o Determine the optimal allocation of resources to reduce risks, commensurate with top managements’ risk tolerances.
The material that is contained herein is based on an academic, scientifically sound foundation as presented in the following risk analytic courses at The George Washington University:
Risk Management for ‘Risks We Face”.
Executive/Collaborative Decision Making for Choices for “Risks We Take”
Portfolio Optimization for allocating resources to best achieve an organization’s objectives.