Run Effectively Of Risk Management

Current financial crisis largely caused by a poorly functioning of risk management. Risk management function should in fact less than perfect in implementation. Therefore, risk management must be improved continuously in order to run more effectively.

Various events in the world has an important contribution to the evolution of risk management, ranging from World War I and II, Great Depression, terrorist attacks, the Asian crisis, Enron and WorldCom scandals, Madoff scandals, until the latest of the global economic crisis that resulted in the fall Lehman Brothers.

People have always tried to learn from experience. The experience provides a valuable lesson so that we do not fall on the same mistake again. Likewise happened to risk management. We tried to minimize the risk with manage it. If it still leaks, then the risk management system repair, and so on.

The crisis this time one of them caused by poorly functioning of risk management in various areas, which resulted in a complex crisis, and have significant impact on people around the world. Starting from granting debt far exceeds the ability to pay, rating agencies which published the rating overstated, the financial institutions are not aware of exposure to derivative products, and a series of other errors.

A number of experts from Wharton assume that too many people who blame risk management models, but it approaches should be corrected. Recommendations from them in order to make risk management more effective.

A comprehensive perspective of risk
Companies must have a broader picture of the risk, not only by risk alone. The trend is happening right now is to sort out the operational risk, market risk, liquidity risk, credit risk, and so on. And, in fact these risks linked to each other, so that without a comprehensive understanding of the risks the company can result from exposure to a big problem.

Risk Management 2.0
If the risk management 1.0 view of how the condition or the company’s current investment and analyze the potential risks occur, it is different with risk management 2.0. Risk management 2.0 is not only focused on risk analysis can provide a direct impact on the company, but furthermore the indirect impact.

Indirect impacts analyzed are potentially affected suppliers or business partners own the company. The more a company depends on a single supplier / business partner, the more strongly the importance to analyze the risks faced by suppliers / business partners. This is because if there is unwanted interference in their then potentially disrupt the company’s business also.

Challenge Assumptions
Form a team consisting of people with the best knowledge, who have foresight and challenging assumptions about the future. This team next task is to explain the risks and events that may occur in the future, which previously had been unthinkable.
To do this, there is now also have a variety of advanced technologies and software that is used to identify risks, such as technology, track and trace, SAP and others.

Complete Quantitative Data with Qualitative
In general, the measurement of risk to produce quantitative data. However, quantitative data is necessary also equipped with qualitative data, in order of business at a more comprehensive risk. Qualitative data can be obtained through benchmarking, judgment, until the discussion other companies, regulators, suppliers, governments, customers, to employees. Thus, we can gain insight about the risks involved and previously unthinkable.

Risk Considerations Many times
Consideration of risk is not enough just to be done once, but done in several stages during the business operation, starting from the stage of strategic planning, budgeting, and so on. Risk is also important to be discussed in more depth periodically, or when there is a big change, a potentially greater impact.