Managing and Identifying risk

A company’s goals and risk management

A company’s goals are important in ensuring that the underlying procedures are followed, especially when it comes to risk management. A risk analysis, on the other hand, advises the necessary course of action that should be done. As a result, risk management approaches are critical if a company is to meet its objectives. This report compares James Kallman’s recommended risk identification and management strategies to those proposed by Peri Pakroo. Furthermore, the study will disclose whether or not the proposed strategies are compatible with one another. It is important to note that risk solutions are arrived at depending on the personnel handling a given issue and the form in which it has arisen.

James Kallman’s risk management strategies

James Kallman in his article Risk Management Solutions explains that “it is through risk management that companies are in a position to create value for their clients” (Kallman, 2008). He proceeds to outline the significance of risk management and the specific scenarios that they are applicable. The two risk management techniques he focuses on are starting safety projects with the motive to save lives and utilizing the purchase insurance policy to compensate a business in the event of losses. Kallman adopts a visual representation that takes the form a tree structure which not only simplifies the rationale behind the techniques but also offers companies options which can be used singly or in a combination.

Considerations for risk management

When running a business, individuals face both threats and opportunities, and the decision lies on whether they should implement or drop these potential profit-making ventures. However, taking into consideration the risk tolerance of the company is vital as this will put the business in a position to avoid undesirable outcomes. Kallman further states that “the next step is to decide the number of resources to be set aside for minimizing the risk or not assigning any amounts after all” (Kallman, 2008). He suggests that if the probability, timing, variance, and impact of the risk fall within the ability of the company, then not mitigating the risk is the best option. For example, in the event there are losses, and the probability is small, a short period of incurring them, the variance is a small figure, and it does have a significant effect on the operation of the business, then the organization should undertake the opportunities without controlling the risk.

Risk prevention and its effectiveness

Regarding risk prevention to avoid losses, Kallman proposes five channels which can be useful. They include fulfilling government mandate, operations management, providing education, contractual transfer, and information management. Not only does prevention provide an avenue for averting a risk but also ensures that there are no financial costs incurred in the process. For this reason, Kallman acknowledges that “prevention is the best technique for mitigating risk” (Kallman, 2008). Therefore, even after carrying out analyses on probability, timing, and the possible outcomes, there are costs associated with this process.

Peri Pakroo’s perspectives on risk management

Peri Pakroo in his article Chapter 7: Risk Management views the identification and management of risk as a way of addressing, reducing, and minimizing the likelihood of undesirable outcomes (Pakroo, 2014). He proceeds to mention insurance as one of the channels through which business entities can use to mitigate risk. It is important to note that the initial stage of identification and risk management begins from the point where the company chooses what it intends to protect. Then after this, the organization should come up with the alternatives it has in averting the available risks. Peri Pakroo proposes prevention to be the most effective way of minimizing risks. He asserts that “Risk management can affect your decisions about what your business does.” (Pakroo, 20140. Therefore, the organization should get rid of ventures that tend to increase the risk factor for the business.

Agreement on risk prevention

From the techniques discussed above, both Kallman and Pakroo acknowledge that prevention plays a significant role in the elimination of risk. Moreover, they consider that this move will also ensure there are financial savings. I agree with the two risk specialists regarding prevention since having noted the risks the business is facing would enable the responsible personnel to identify the ideal prevention mechanisms. For the case of Kallman, using a risk management solution tree comes along way in ensuring the company makes good decisions to avoid making losses. On the other hand, Pakroo suggests that companies should identify what they need to protect and thereby be in a position to devise ways of handling the underlying threats. Both techniques will yield minimal risk to the business which means that they can attain their set targets.

The significance of risk management

In conclusion, when managing risk, businesses should consider the resources set aside for the process. However, doing a thorough analysis before anything else is important as it will guarantee a successful process of risk mitigation afterward. It is important to note that identification and managing risk plays a significant process in the decision-making process. Kallman and Pakroo adopt various techniques aimed at managing risk but acknowledge that prevention is the most effective solution to risk elimination.

References

Kallman, J. (2008). Risk Management Solutions. Risk Management, 55(3), 40-41. Retrieved from http://search.proquest.com/docview/227003537?accountid=32521

Pakroo, P.H. (2014). Chapter 7: Risk Management. Small Business Start-Up Kit, 123-139. Retrieved from http://eds.a.ebscohost.com.proxylibrary.ashford.edu/eds/pdfviewer/pdfviewer?vid=6&sid=0704fbdf-3328-4104-bc6d- ae1282480749%40sessionmgr4004&hid=4102