Risk Management

Business organizations run in environments that are filled with uncertainties. For this reason, it is imperative for organizations to take considerable efforts to identify the risks they face, evaluate, and prioritize them before coming up with measures that can cover these risks and protect the business from suffering irreparably from these risks (Crockford, 2016). Risks can come from a number of sources such as uncertainty in the financial markets, legal liabilities, project failures, credit risk, accidents, deliberate attack from an adversary, natural causes and disasters, or from events of uncertain root-cause. Two types of events can affect an organization and they are either positive or negative events. Negative events are risks while positive events are known as opportunities that an organization can take advantage to advance its interests. A number of risk management standards have been developed and used in risk management (Crockford, 2016). They include the National Institute of Standards and Technology, actuarial societies, the Project Management Institute, and the ISO standards. In this case scenario, LTD Acceptance is a private property and auto insurance carrier that wants to access and determine the risk it faces in its operation. This will be very important, as it will enable the management team to come up with risk management ways that can help protect the organization from the negative impacts of the risks.
Why is identifying risk exposures significant? What are the ramifications for organizations that fail to properly identify risks they are exposed to?
The identification of risk is very important in risk management. One reason why this is significant in business management is that it enables managers to identify all risks that can befall their organization and therefore, prepare for any eventuality. This makes the management to be proactive rather than reactive and be able to save the organization from adverse risks in the event they occur (Crockford, 2016). For example, an organization that has identified tough economic and financial risk happening in the future may allocate some funds to help the organization operate efficiently in the event the risk occurs. This may save the organization from collapsing under a difficult financial period. This may not be the case for an organization in the same industry that failed to identify this risk and place good mitigation measures in place. These organizations are bound to collapse during this period, which shows the importance of risk identification in the business world.
What are the market risks LTD encounters?
Market risk in a business organization is the risk associated with loss in positions as a result of movements in market prices. This is a major risk faced by LTD Acceptance. One reason that can lead to this risk is diminished profitability. Markets are very sensitive to profitability margins and in many cases, an organization may lose its market position once they start making slim profit margins or even start making a loss (Hubbard, 2016). Investors are always looking to invest in profitable business organizations. Interest risk or risk brought about by fluctuations of interest rates can also lead to loss of positions in the market.
What business risk does LTD encounter in its day-to-day operations?
Business risks are the risks LTD encounter on a daily basis. The organization specializes in selling policies to sports cars and this may happen when the taste and preference people have for sports cars changes and they start driving other models. This may result in a reduced number of sales hence its profitability (Hubbard, 2016). Other business risks the organization may face may include increased competition by other industry players, changes in government policy regarding its products or operations, strikes by employees, or even change in leadership that may affect the organization negatively.
What compliance and human capital risks might LTD face?
Compliance risk is the risk business organizations face in case they do not adhere and comply with all rules and regulations that govern their industries. The penalties organizations face may include high fines and penalties, deregistration, and closure of the business by government agencies This is a major risk that LTD faces. For this reason, the management team should ensure that they adhere and comply with all insurance laws and regulations (Crockford, 2016). They may also face human capital risks and these risks involve high employee turnover rate, strikes, and go-slows, as well as, legal proceedings brought against the organization by one or some of its staff members.
How do risk management activity correlate with overall productivity?
Proper risk identification and coming up with good mitigation or strategic methods to protect an organization against these risks is positively correlated to high productivity. Good risk management leads to high efficiency and effectiveness in how employees perform their duties at the workplace (Hubbard, 2016). The main reason for this is that even if a risk occurs it cannot slow the operations of the organization in any way as the risk measures in place can help insulate the employees and the organization from any negative impact of the risk
The paper has shown how important risk management is to any organization. For this reason, it is important for business managers to employ skilled and experienced risk managers in their organizations who will be charged with the responsibility of protecting their organization from any risk that may occur.

Crockford, N. (2016). An Introduction to Risk Management (2 ed.). Cambridge, UK: Woodhead
Hubbard, D. (2016). The Failure of Risk Management: Why It’s Broken and How to Fix It. John
Wiley & Sons.

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