The Importance Of Risk Management For Companies
The main objective of the company’s owners when run their business in general is to increase their corporate value and maximize prosperity of the company owners or shareholders (shareholder’s wealth).
To achieve this, the company’s owners is obliged to apply risk management in their business.
All levels management in the company must implement risk management. In fact, the shareholders should not only eager to get dividends, but they must apply risk management and care of the risks that may arise in their business.
Risk always comes up and the effect it could have unpredictable, if we never know the pattern. Therefore, businesses should take note and study the emergence of risks, including the frequency and activity, in order to know the pattern of risk for the business.
Why risk must be identified and managed? The answer is not hard to guess, that is because a risk contains cost that not small. A recent example of this occurred when a car manufacturer Toyota was asked to recall the vehicle / re-call a massive in the U.S. after a number of accidents occurred on some type of Toyota products. Errors may occur on the carpet floor of the car, the gas pedal that can make the car drove itself despite not being stepped on the gas pedal and brake systems. As a result, approximately 8 million vehicles of Toyota all around the world are withdrawn from circulation. This shows how expensive a risk. To regain the trust of users that had decreased, the car manufacturer of Toyota will reveal any damage or defects in the car that was repaired by Toyota, even the slightest damage. Steps to be taken by Toyota is the first conducted by car manufacturers, because actually there is no obligation for car makers to report minor repairs.
Anything else other risks which may be experienced by businesses, namely the increase in raw material prices.
Well, here’s where the importance of risk management. Effective risk management can minimize risk and cost of maintaining company performance.
Risk management related to the principle of Good Corporate Governance (GCG), where the principle of transparency in GCG implementation of enterprise-wide demands of risk management by companies.
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