Risk identification is an underdeveloped art Discuss and include an Essay

Risk identification is an underdeveloped art Discuss and include an overview of risk identification aids and techniques in yo - Essay Example These entrepreneurs are called trendsetters in a market. In a dynamic environment, swift business decisions are required to be taken in response to the fast changing environment. This adaptability is essential for the survival of the business. Risks in a business cannot be avoided. Is the management risk averse? Risk is inevitable in a business process and it is involved in every activity of the business, though the degree of the risk is insignificant in many cases. Therefore, the approach should be: Is a particular risk tolerable, considering the willingness and ability of the management to take risk? The business decisions need to be consistent with the management’s policy with regard to risk. In all other cases, the management has to decide whether the risk is acceptable at all. Therefore, risk identification is a continuous process in an organization to evaluate the risk potential of the business decisions, its impact on the business in the worse scenario and the risk rewa rd ratio. Risk Analysis If risk identification or analysis is considered as an art, the passion and ability for analysis on the part of the personnel is important, and the management’s recognition and support for this function should form the basis for its efficient and successful functioning and contribution to the business development. Risk analysis or risk identification in this sense is as a continuous process as a part of the management function with necessary authority at its disposal and suitable place in the management structure. Risk analysis calls for collecting information from external and internal sources. The analyst needs to possess the analytical ability and proficiency in using various analytical tools for the purpose of analysis. Collection of information from the internal sources through various periodical reports, surveys, job cards and other records is a regular process. Classification of this information for various analytical purposes for the current us e or storage of the classified information for future use is important. The information has to be cross-verified for its correctness and reliability by using various auditing and other techniques. The information is analyzed for abnormalities or other indications and recorded either for future use or further action by the different departmental heads. Barron and Barron (2011) suggest keeping the management informed of project risks and potential impacts at all times. The understanding of the business by the analyst in this process is enhanced and it would be useful in evaluation of the strengths and weaknesses in the system. Strengths and Weaknesses of the Organization Analysis of the internal strengths and weaknesses of the organization is the first step in risk identification because opportunities and challenges in the environment have to be analyzed in relation to the strengths and weaknesses of the organization to evaluate the preferred course of action or to formulate adaptive strategies. Starr et al. (2003) state, ‘Enterprise resilience is the ability and capacity to withstand systemic discontinuities and adapt to new risk environments. A resilient organization effectively aligns its strategy, operations, management systems, governance structure, and decision-support capabilities so that it can uncover and adjust to continually changing risks, endure disruptions to its primary earnings drivers, and create advantages over less