Fundamentals of Risk Management

Future for risk management
As the global financial crisis has unfolded, there is an increasing tendency for news 
reports to indicate that risk is bad and risk management has failed. In reality, neither 
of these two statements is correct. Organizations have to address the risks that they 
face because many of them have to undertake high-risk activities, either because 
these activities cannot be avoided, or because the activities are undertaken in order 
to produce a positive outcome for the organization and its stakeholders.
The global financial crisis does not demonstrate the failure of risk management, 
but rather the failure of the management of organizations to successfully address the 

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Risk management
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risks that they faced. Achieving benefits from risk management requires carefully 
planned implementation of the risk management process in the organization, as well 
as the design and successful embedding of a suitable and sufficient risk management 
framework.
By setting out an integrated approach to risk management, this book provides a 
description of the fundamental components of successful management of business/
corporate risks. It describes a wealth of risk management tools and techniques
and provides information on successful delivery of an integrated and enterprise-wide 
approach to risk management.
Risk management is changing rapidly, in terms both of the tools and techniques 
that are applied and the governance structures that are being introduced to ensure 
successful management of risk. Organizations need to be more cost conscious, and 
this has resulted in the emergence of approaches such as Governance Risk and 
Compliance (GRC). GRC represents an approach that is designed to be both effective 
and cost efficient in terms of the results that are achieved.
With many organizations having to introduce cost-cutting and finding the current 
trading conditions difficult, emerging risks have never been more important. For 
many organizations, it is a challenge to keep their risk exposure within the risk 
capacity of the organization. Events can occur that could be devastating for the 
organization. In these difficult circumstances, organizations need to pay more atten-
tion to an analysis of the triggers that could result in significant risks materializing, 
as well as developing detailed plans to manage any crisis that does arise.
The list below offers a summary of the actions that would help to avoid a repeat 
of the global financial crisis. Many organizations lack a common risk management 
framework across the enterprise. This has many elements, each of which is required 
to help avoid similar disasters in the future:
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First, there should be common processes, terminology and practices for 
managing risks of all kinds.
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Second, it is essential that risk tolerances be fully understood, communicated 
and monitored across the enterprise.
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Third, risk management practices should be incorporated into all key business 
processes and decisions.
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And, fourth, management should make risk-related decisions using dedicated 
high-quality risk information.