Twelve Factors to Determine When to Take and When to Avoid Risk
A Smart Approach to Board Level Risk Management
As the economy recovers, companies that cut costs or deferred spending at the bottom of the recession are now looking to reinvest: in hiring, new debt, facilities or equipment, or business acquisitions. How much risk is too much?Â This presentation details critical internal and external factors to examine.
Very risk-averse people will freeze if there’s any risk at all; their daredevil cousins will charge ahead regardless. But theÂ probabilityÂ andÂ consequenceÂ for each risk should be considered. We don’t insure against meteor strikes, because the probability is infinitesimally low. We do insure against fire because even though the probability is very low, the consequence is enormous.
Risk managers of large financial portfolios actually quantify probability and consequences in all manner of permutations. If your calculus is rusty, simply noting each probability and each consequence as High, Medium, or Low will be helpful; risks that rate “High/High” are worth special attention.