Download Fin Risk Assessment and Risk Management

Joshua Waibe
7/31/2017l
COSC 316
Risk Assessment and Risk Management
Risk management (risk assessment) is an idea and a practice
that has been around for hundreds of years. In 1654 Blaise Pascal and
Pierre de Fermat established the basic principles of probability and
ushered in the notion of risk management. Their reason for coming up
with the idea was to gain the edge in gambling. Since then Risk
management has been crucial to the financial industry but should the
concept of risk management be applied to other areas of business as
well.
Today there are many levels of risk management involving
financial issues. One mechanism to ensure proper risk management in
financial institutions is separate the employees of a bank that sell
loans from the ones who approve the credit. This eliminates a potential
conflict of interest because the employees that sell the loans get
rewarded for number of loans and the employees that approve the
loans get rewarded for the credibility of the loans they approve. By
separating these two incentives you allow the seller to be motivated to
sell as much as possible and the approver to be able to make proper
risk management decisions about the loan.
Risk assessment shouldn’t stop at the lower levels. For a
company to be successful and stay successful it is import to implement
Joshua Waibe
7/31/2017l
COSC 316
proper risk assessment from the top down. Companies around the
world are realizing this and are making attempts, to some degree, to
include risk assessment in there businesses. Still many companies limit
there risk management to their financial sectors. In order for
companies to make the best decisions possible they must apply risk
management to all aspects of the company especially the IT field. As
many companies are coming to realize if you don’t put enough
resources into information assurance insurance companies will not
want to pick you up. This was not as much of a problem in the past
but as more and more companies are doing business online protecting
the data is harder to ensure.
The future of any business is uncertain. There is no way of
always knowing the right decision to make or how to always avoid the
pitfalls of life. At least with a well orchestrated and well implemented
risk management department you can give your company a fighting
chance and allow it to make the best choices possible.