RISK ASSESSMENT PROCESS

Risk Assessment Process



Risk Assessment Process

Introduction

Risk management is a phenomenon that comprises of identification, assessment, analysis, as well as, decision making in a process of making an investment. It is defined as “it is a domain of financial management that encompasses of identification, quantifying and management of uncertainty in a given investment”. The dynamic environment of corporate management today holds a colossal deal of uncertainty for organizational decision pertaining to investment or and utilization.

The purpose of the study encompasses of assessing enterprise risk management in Chesapeake Energy. Chesapeake Energy equipped with the latest drilling and extraction techniques, the second largest producer of natural gas in US is Chesapeake Energy. Its Headquarters are in the Oklahoma City, and the company holds considerable businesses of marketing and oilfield services (www.chk.com). The study is aimed to look at the procedures and policies undertaken by Chesapeake Energy, as well as, a detailed assessment of the enterprise risk management procedures by the company.

Discussion

The process of risk management is not just to identify the occurrence of unexpected events, but also to prepare for those vulnerable events. Each and every project of the organization has certain level of risks factors associated with it. The progress of organizations can also be affected due to the existence of those risks. Risks have the capability to deviate the organizations from their actual goals, if they are not controlled effectively. The Enterprise Resource Planning implementation is termed as vulnerability, uncertainty or liability that causes the project to differentiate from the project plan. Chesapeake Energy need to adopt an approach to handle systematic risks and design an effective plan to mitigate with those risks, in order to complete their project within time and with the same budget as it is set for the project.

While on one hand it can present a risk to the company in the shape of unexpected unfavourable outcomes (Haimes, &Yacov, 1998, p97), while on the other hand, it can provide an opportunity for the company to explore the environment and deal with it better than others and successfully deliver superior value to stakeholders. The reactive approach to elements of the environment is a gone case now, however, no matter how much an enterprise strives to know about the future, there still be unexpected outcomes, but relying totally on reactive approach is not feasible in today's competitive environment.

Management sets strategy and objectives in an attempt to maximize value and design optimal fit between the environment risk and opportunities, and firm's resources. Enterprise risk management encompasses aligning risk appetite and strategy: under the ERM, management considers the appetite of entity in evaluating strategies alternatives, setting alternatives, related objectives and developing a mechanism to effectively manage the related risk. It further works on reducing the operational risks and losses (Celent, 2006, p85).

The Chesapeake Energy management failed to recognize the danger of failure in filling compartment. Provided the management had made analysis of it, the situation would have been ...