Strategic Management of Risk

by

Executive Summary

Risk management encompasses the activities dealing with risks after they are identified and evaluated. Risk management, as well as risk assessment and risk communication, are part of the comprehensive term of risk governance, which is a systematic approach toward coping with risks under participation of all relevant actors (government, companies, the scientific community, nongovernmental organizations, and the general public). Risk management starts as soon as there is sufficient evidence for hazards identified and evaluated by risk assessment.

Risk management is also dealing with identified concerns that were analyzed by concern assessment based on risk perception studies, economy impact assessment, and the scientific characterization of social responses to risk source. At present, the production and use of engineered synthetic nanoparticles show high evidence of risks in this field. There are particular concerns about the use of nanoparticles in feed and cosmetics. However, different nanotechnologies and specific applications require different risk management strategies.

Table of Contents

Research Question8

Aim8

Objectives8

Literature Review10

Introduction10

Risk Management11

Risk management: A Definition12

Application of Risk Management13

General Risk Management Process14

Identify15

Identify16

Plan17

Plan18

Respond19

Significance of having a formal Risk Management Process20

Benefit of adopting a formal Risk Management Process22

The Limitations of Risk Management process23

Background And Hypotheses25

Consequences of not adopting a formal Risk Management Process27

Analysis and Discussion35

Analysis and Discussion35

Conclusion60

Recommendations60

References64

Bibliography71

Research Question

Aim

Few debates about strategy fail to mention risk. Yet risk is a neglected idea in much formal strategic thinking. The classic summary of major contributions from the 1970s and 1980s, Weitz and Wensley's Readings in Strategic Marketing has no index reference to risk (Weitz and Wensley, 1988). Nor does Michael Porter's highly influential Competitive Strategy (Porter, 1980). The recent Oxford Handbook of Strategy, (Faulkner and Campbell, 2006) at near 1,000 pages has seven index references to risk. Even here comments are passing. Five relate corporate diversification to reducing risk, one suggests that more limited opportunities for product testing impose higher risks on service organisations compared to manufacturing and one draws a formal distinction between risk and uncertainty. This is not intended to be critical; all of these are excellent and rightly influential books. However it does show the extent to which the idea of risk is neglected within strategic management and when it is mentioned, the degree to which strategic thinking borrows from finance and economics.

Ruefli et al. (1999) make a call for a broader range of approaches to thinking about risk in strategic management. This is a major opportunity. Modern economic psychology has developed a broad and rich picture of risk, not just as a technical concept, but as something that influences the way in which strategists think and make decisions about risk and act within their risky worlds.

Objectives

Strategic management has distanced itself from the notion that strategy development is a matter of programming the organization with a strategic plan (Mintzberg, 1994) to one where strategy creation is a process incremental crafting (Mintzberg, 1988; Courtney, 2001). So space exists to integrate the idea of risk as a psychologically human feature of strategists' decision-making and behaviour as well as the economic idea that appears in finance ...