How calculated are risks?
|Understanding the unknown :|
Calculated risks are an oft repeated term that organizations resort to in day to day operations and business. But how calculated are these risks and what is the risk appetite of the organization?
Risk, by itself, in more ways than one is generally perceived with a negative connotation. In order to understand the gamut of risk from a business perspective it is essential to demystify "business risks" from those risks that a business exposes itself due to inaction or ignoring the obvious.
Risk appetite, when properly articulated, is both a measure of identifying and mitigating risks as well as enhancing the overall organization's performance and competencies.
In summation, risk appetite may be defined as extent or quantum of risk an organization is willing to undertake in pursuit of its strategic goals. There is no "one size - fits all" when it comes to risk appetite and as a rule is "tailored to suit".
|Tenets of risk appetite :|
The organization, in general, has to go through the following steps in sequence :
In order to harness the benefits of calculated risk to propel the organization in the direction of greater glory, it is essential that corporate behavior and responsibility are consistently reinforced.
The corporate environment should foster and encourage the stakeholders to bet on the company to constantly review and increase its risk appetite for the greater good. Greater the risks better the rewards, so long as the risk appetite is clearly defined, deployed and implemented.
(This blog post is authored by Venkatesh Nagarajan, Co-founder at SansPareil - www.sp-cag.com)
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