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Principles of Management
Principles of Management Assignment
BS-ME, 2016-2020
USMAN K. QURESHI
Department of Mechanical Engineering (DME), PIEAS, Nilore 45650, Islamabad, Pakistan
The risk management field has received a lot of attention over the last decade as a result of the change in the way
businesses run and the occurrence of several events with impact in the global economy such as the 2008 collapse of
the credit market and the housing market meltdown in the USA, the 2010 Gulf of Mexico oil spill or the 2011 incident on
the Japanese nuclear power plant of Fukushima-Daiichi. As a result, risk management has become a main topic as
plays an increasingly important role in the strategy of an organization. This paper presents different perspectives on how
risk management has been addressed by organizations, and/or enterprises, the different types of risk managers and
different categories risks that exits in the organizations and enterprises and this paper also proposes a classification for
managing different types of risks and how to approach them. In the end it is also discussed that why it is hard to talk
about risks.
Company managers have three general options o Category III: External Risks
when it comes to choosing a risk manager. Category I: Preventable Risks: This risk
category is best managed through active
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Principles of Management | Risk Management
prevention: monitoring operational processes and 2.3 VW's Risk Management Unit
guiding people’s behaviors and decisions toward Volkswagen do Brasil (subsequently
desired norms. Since considerable literature abbreviated as VW), the Brazilian subsidiary of the
already exists on the rules-based compliance German carmaker. VW’s risk-management unit
approach, we refer interested readers to the uses the company’s strategy map as a starting
sidebar “Identifying and Managing Preventable point for its dialogues about risk. For each
Risks” in lieu of a full discussion of best practices objective on the map, the group identifies the risk
here. events that could cause VW to fall short of that
objective. The team then generates a Risk Event
Category I: Strategy Risks: Over the past 10
Card for each risk on the map, listing the practical
years of study, experts have come across three
effects of the event on operations, the probability of
distinct approaches to managing strategy risks.
occurrence, leading indicators, and potential
Which model is appropriate for a given firm
actions for mitigation. It also identifies who has
depends largely on the context in which an
primary accountability for managing the risk. The
organization operates? Each approach requires
risk team then presents a high-level summary of
quite different structures and roles for a risk-
results to senior management.
management function, but all three encourage
employees to challenge existing assumptions and The Risk Event Card: VW do Brasil uses risk
debate risk information. Our finding that “one size event cards to assess its strategy risks. First,
does not fit all” runs counter to the efforts of managers document the risks associated with
regulatory authorities and professional achieving each of the company’s strategic
associations to standardize the function. objectives. For each identified risk, managers
create a risk card that lists the practical effects of
Category I: External Risks: External risks, the
the event’s occurring on operations. Below is a
third category of risk, cannot typically be reduced
sample card looking at the effects of an interruption
or avoided through the approaches used for
in deliveries, which could jeopardize VW’s strategic
managing preventable and strategy risks. External
objective of achieving a smoothly functioning
risks lie largely outside the company’s control;
supply chain.
companies should focus on identifying them,
assessing their potential impact, and figuring out
how best to mitigate their effects should they occur.
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Principles of Management