Corporate Risk Management - Hindrance Term Paper

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Internal entities therefore bear the burden of the company's interest, making the risk identification process subjective, and compromising it to the eventual disadvantage of the company. Here also it is advisable that entities from the outside be involved in the process.

The risk quantification process refers to assessing the scale of severity in the risks identified. When a risk is identified, resources need to be allocated in order to mitigate it. Severe risks will therefore require a greater amount of resources, while lower severity also means lower priority. Quantification therefore results in prioritizing. This is a process that can then mitigate the financial resources necessary for preventing the risk factors involved.

In the quantification process, however, ambiguity and subjectivity are also detrimental factors. Ambiguity for example means that there is uncertainty regarding which priority to assign to which levels of risk. Once again, subjectivity works in concomitance. Internal risk teams for example may be in disagreement regarding the severity of certain risks because of subjective opinion.

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Such opinion may for example be driven by the company departments within which the members of the risk assessment team works. Each worker may then feel that the risks within their specific department should carry a greater priority than the other possible risks.

In order to mitigate the factors of ambiguity and subjectivity in the risk assessment process, it is therefore advisable to work with external teams. The reason for this is that workers within a company often operate subjectively rather than objectively, because of their personal experience within the company. Personal experiences with risks necessarily influences the perception of a person regarding these risks.

In order to be effective, all risk assessment strategies should therefore be carried out in as objective and unambiguous a manner as possible......

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