RISK MANAGEMENT Essay Example | Topics and Well Written Essays - 1000 words

RISK MANAGEMENT - Essay Example absolute leadership defines the essay assimilation and shares that vision with care. Leadership acts as if it takes in its vision. In the feedback cycle, leadership listens to new bumps determine and responds with a way of life of action consistent with the culture of stake. (Marks and Rassmussen, 2010) (Hopkin, 2010) concern commits to the leadership vision and manages to that standard. Teamwork is essential throughout the workforce and it is precaution that provides the regulation of the team. Management trains employees to respond properly to risk of exposures, for example, wearing safety equipment or using machinery correctly. Management monitors the results of risk management tactics and accounts for poor risk taking behaviors. Management establishes quantitative analysis tools to measure risk culture compliance. Any problem areas are reported to leadership, discussed and a mutu all toldy agreed upon intervention occurs. (Marks and Rass mussen)(Hopkin, 2010) Strong financial risk cultures identify key risks inherent in the business these may include gold exchange, interest rates, diversification issues, fluctuating suppliers prices and raw commodity pricing. The key financial risks order by primacy from largest head ache to least impactful. The financial risk manager reviews the company risk tolerance and manages the priorities accordingly, implementing strategies and tactics to reduce risk where desired. These tactics usually involve the derivative markets, like interest rate swaps and commodity trading. Risk management is a repetitive process, so the financial risk manager monitors the markets of concern and refines his strategy as needed. (Horcher, 2005) (Das, 2006) functional risk management concerns both management and measurement of risk. Traditionally, operations risk management involved all the company processes and systems, all employees for management and training, and any external event, such as polit ical interference. A unvoiced culture identifies, measures and implements a strategy consistent with overall company goals. Of course, on-going stewardship is required as with the financial risk management. (Abkowitz, 2008) Weak Risk Culture Weak risk cultures begin with resistant leadership, sometimes arrogant leadership. Management is either not told goals or communications are not transparent. Leadership and management must believe in and be committed to the same vision of risk culture. New risks are not identified on a timely basis, on-going stewardship is an essential part of a strong risk culture. Underutilizing personal or improper training creates a vulnerable risk culture operationally. Only considering risk avoidance and moderateness rather than proactively seeking profitable means to deal with risk is a characteristic of a weak risk culture financially. For instance, trading in derivatives can be profitable by trading dangerous interest rate situations for more time s ensitive hedges. Weak risk cultures do not do what strong ones do. (Anderson and Schroder, 2010) Risk-Return/Risk-Reward The financial risk manager observes the risk-reward behavior of financial instruments in order to determine the least risk available for the highest return. If all instruments shared the same risk, the investor would choose the highest reward. If all risks had the same reward, investors would choose the last risk. This balance is achieved through diversification of investments and managing the volatility of an investment