INTRODUCTION & DEFINITIONS OF RISK:
- Risk derives from the early Italian word “risco” which means danger or “risicare,” which means “to dare” or French word “risqué”. Risk is a choice rather than a fate. The actions companies dare to take are central to our definition of risk. Risk and reward are two sides of the same coin. Risk leaders choose their risks well.
- They look at external and internal risks in broad context. They integrate decisions with corporate strategy, and strike a healthy balance between risk management as an opportunity and a protection shield.
- A business event if it occurs; can have a positive or negative impact on business’s objectives. Generally when we discuss risks we fall into the trap of thinking that risks have inherently negative dimension.
- However, one should be open to those risks that create positive opportunities; you can make your business faster, better and more profitable.
- Let us look at a example here say on account of non-compliance with environmental laws few old suppliers of a Corporate entity were restricted from supplying materials to the Corporate entity at preferred rates. This posed a challenge to the corporate entity as they have to find new suppliers who would be compliant with environment laws and also perhaps the new rates would be significantly higher than the preferred rates of the old suppliers. The Corporate entity undertakes a detailed supplier discovery exercise and realises that the new suppliers are willing to supply materials at rates that are lower than the preferred rates (agreed with their old suppliers), thus a potential challenge or threat has been converted into an opportunity to reduce the Corporate entity’s procurement spend. Think of the adage – “Accept the inevitable and turn it to your advantage.” That is what you do when you take business risks to create opportunities.
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