Theories of Risk Management

Theories of Risk Management

By Megan Jorgensen

Just like parcours (a popular topic, consisting of a potentially very dangerous sport of running across buildings, depicted in cartoons such as American Dad episode Stanny Boy and Frantastic, mystery and thriller television series, and in music lyrics and cinematography), management and business studies is a popular subject in movies. For example, in the controversial movie Friends With Benefits, featuring Justin Timberlake (singer) and Mila Cunis (That 70s Show with Ashton Kutcher) he is a successful Website manager, while she’s a savvy headhunter.

Furthermore, Frigo & Anderson (2011) react to the financial crisis surrounding the events of subprime mortgages and subsequent bank collapses that started taking place somewhere around 2008. The authors do so by looking at risk management and enterprise governance. Enterprise risk management (ERM) is a significant area for businesses to look at in attempting to achieve commercial success. The issue has gradually gained international recognition, with the International Organization for Standardization (ISO) issuing a set of directives on how the process(es) should be carried out. In addition, credit rating agencies such as Standard & Poor’s and Moody’s have demonstrated interest in a firm’s ERM system. As one knows from introductory economics courses, risk-loving individuals significantly differ in their investing strategies from risk-avoidant, or even risk-neutral individuals. Interestingly, the Strategic Risk Management Lab at DePaul University concentrates on devising countermeasures and focusing on such areas as the KRIs (Key Risk Indicators). Further, the RIMS (Risk & Insurance Management Society, Inc.) developed a risk management council. Moreover, management and business studies theorists point out that businesses tend to be dynamic, and thus risk management is a crucial issue to business teams. A top down approach to management may be warranted.

In the past and in the present risk management exists. Photo by Elena

By the same token, management studies can be quite elaborate and specialized, and used in areas not directly involved with trade. For example, managing resources is important in ecology, environment, and earth and planetary science (e.g. Bestelmeyer, 2011).

References:

Bestelmeyer, B. T., Goolsby, D. P. & Archer, S. R. (2011). Spatial perspectives in state-and-transition models: a missing link to land management? Journal of Applied Ecology, 48: 746-57.

Frigo, M. L. & Anderson R., J. (2011). Strategic risk management: A foundation for improving enterprise risk management and governance. Wiley Periodicals Inc.

Copyright © 2011 Megan Jorgensen. All rights reserved.