FIN415 Risk Management Identification and Assessment

FIN415 Risk Management Identification and Assessment - Risk...

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Risk Management Identification 1 Risk Management Identification and Assessment Corporate Risk Management FIN415
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Risk Management Identification 2 “Risk is inherent in every activity that we undertake. Our business exposes us to strategic, credit market liquidity, compliance, operational and reputational risk” (Bank of America Annual Report, 2011, p. 65). Merrill Lynch must address specific risks in each of the five general categories mentioned in the Bank of America annual report. In this paper the subject to address is the benefits of risk management along with an assessment of how risk management contributes to stakeholder wealth maximization. Risk Monitoring and Control The benefits of monitoring risk and internal control procedures include: More effective strategic planning Better cost control Enhance shareholder value by minimizing losses Increased knowledge and understanding of exposure to risk Systematic, well-informed methods of decision making Minimal disruptions Better resource utilization (Adamus Resources Ltd., nd). Risk monitoring is generally the obligation of an organization’s risk manager. The job of a risk manager is considerably broader than merely buying insurance. Organizations need someone inside the firm with the firm’s best interest at heart. The job of protecting the firm’s assets is generally too important to put into the hands of an outsider. For these reasons, the risk manager
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Risk Management Identification 3 is increasingly recognized as a full-time employee of an organization (Trieschmann, Hoyt, & Sommer, 2005). Risk monitoring should be ongoing and continual in organizations. Monitoring risks is important early in project cycles when the risk of problems is generally highest. It is important as an organization monitors risks revealed in risk studies to look for new risks that may emerge over time. Some methods to aid in risk monitoring include is to assign an owner to each risk for monitoring, hold regular risk meetings, and identify triggers for reviewing risks (Better Projects, 2007). “Risks should be monitored to ensure that the critical ones are managed in the most effective way and the less critical ones do not become critical” (Merna & AL-Thani, p. 61, 2008). Imaginative responses to risk Generating responses to risks requires that organizations effectively manage risks to seize opportunities that will aid in achieving business objectives. This means that circumstances and events relevant to organization’s objectives needed to be identified and assessed in terms of likelihood and impact. Risks may not be independent of each other, they may need to be refined and clarified further to look for links between the risks. Proactively addressing risks and opportunities protects and creates value for customers, employees, owners, regulators, and stakeholders. Bank of America Merrill Lynch has developed innovative risk management strategies
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FIN415 Risk Management Identification and Assessment - Risk...

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