Risk Management Case Study Example | Topics and Well Written Essays - 3500 words

Risk Management - Case Study ExampleRisk focal point is the practice of managing the resources of the operation in such a way as to maintain an acceptable level of risk. This in turn should generate a corresponding level of return that allow allow the goals of the operation and management to be achieved. The use of time, financial and other resources to effectively manage the risks so that goals can be achieved is the risk management. Risk management comprises of risk assessment and risk control. Assessing Risk is identifying and analyzing risk. Controlling Risk is taking steps to reduce risk, provide contingency, monitor improvements. Risk Management is important for ensuring that a computer project isnt scuppered, preventing accidental loss or disclosure of information, avoiding computer fraud, hacking, ensuring the smooth running of an information system and maintaining your c beer prospects.Sources of Risk There are five main sources of risk in an operation production risk, ma rketing risk, financial risk, legal risk and human resource risks. Production risks include reappearance and quality variability. Marketing risks include changes in the price and external conditions. Financial risks include variability in debt, equity capital and ability to meet bills demands. Legal risks include responsibilities for contracts, statutory compliance, tort liability and business structure. Human Resource risks include people management and estate transfer.Types of Risk There are two types of risk that affect the volume of investment. The first is the entrepreneurs or repeaters risk which arises out of doubts in his own mind as to the probability of his actually earning the potential yield for which he hopes. This is a rattling social cost, though susceptible to diminution by averaging as well as by an increased the true of foresight. If a man is venturing his own money, this is the only risk which is relevant. But when a system of borrowing and lending exists, w hich means the ranting of loans with a margin of real or personal security, a second type of risk is relevant which we may call the lenders risk. This may be due either to moral hazard, i.e. military volunteer default or other means of escape, possibly lawful, from the fulfillment of the obligation or to the possible insufficiency of the margin of security, i.e. involuntary default due to the mortification of expectation. This is a pure addition to the cost of investment which would not exist if the borrower and lender was the same person. Moreover, it involves in part a duplication of a correspondence of the entrepreneurs risk, which is added twice to the pure rate of interest to give the minimum prospective yield which testament induce the investment. For if a venture is a risky one, the borrower will require a wider margin between his expectation of yield and the rate of interest at which he will think it worth his while to borrow whilst the very same reason will lead the len der to require a wider margin between what he charges and the pure rate of interest in order to induce him to lend (except where the borrower is so strong and wealthy that he is in a position to offer an exceptional margin of security). During a manna the popular estimation of the magnitude of both these risks, both borrowers risk and lenders risk, is apt to become unusually and imprudently low.From