| The practice by which a firm optimizes the manner in | | | | organization's culture and then work to change it. |
| which it takes business risks is called risk management. | | | | Books like "CRM: An Organizational Perspective" and |
| It includes monitoring of risk taking activities, upholding | | | | "CRM: Global Best Practices" are a must read in this |
| relevant policies and procedures and distributing | | | | context. |
| risk-related reports. | | | | Policies & Procedures: These are powerful tools |
| The scope of Corporate Risk Management extends | | | | of corporate risk management as they direct your |
| to the risks of non-financial corporations and financial | | | | employees' actions. They specify how people can |
| institutions that are not engaged in trading or | | | | accomplish their tasks, but if neglected, can become |
| investment management. Risks vary from one | | | | an impediment. |
| corporation to another depending on factors such as | | | | Just setting policies or procedures isn't enough; you |
| size, industry, diversity of business lines, sources of | | | | need to ensure your employees follow them. |
| capital, etc. Practices that are appropriate for one | | | | Formalizing the way in which you change existing |
| corporation are inappropriate for another. For this | | | | policies or procedures will help your employees |
| reason, corporate risk management may only be | | | | recognize the changes taking place. |
| broadly defined. Companies pick and choose from | | | | Technology: Technology plays an important role in risk |
| several techniques to suit their own needs. To make | | | | assessment and facilitating communication. It is used to |
| things easier, risk management templates and tools are | | | | quantify or summarize risks as they are being taken |
| available with vendors. | | | | and then communicate this information to decision |
| Let's take a look at the prerequisites for successful | | | | makers. It can include an interactive risk report that is |
| corporate risk management (CRM). | | | | electronically circulated to managers every day. |
| Corporate Culture: Your business can manage risk | | | | Independence: Effective corporate risk management |
| only when your employees are willing to deal with it. | | | | demands independence of the risk managing functions |
| Often, you might have a tough time with this. You build | | | | from the risk taking ones. Some guidelines for fostering |
| systems but cannot force implementation which is | | | | this independence are as follows: |
| necessary to effectively manage risk. | | | | 1. Lines of reporting should be reasonably independent. |
| Your company's culture plays an important role in | | | | 2. Except at the highest levels, risk takers should not |
| corporate risk management, as it has an influence on | | | | be involved in reviewing performance, deciding |
| the level of risk taking by the organization. A positive | | | | compensation or recommending promotion of risk |
| risk culture promotes individual responsibility and | | | | managers. |
| supports risk taking. No risk culture is perfect, and is | | | | 3. There should be no switching of employee roles |
| therefore open to improvement. Your challenge as a | | | | between risk taking and managing. |
| business leader is to honestly assess your | | | | |