What do you understand the good concept and tools for risk management? How to manage risk as an entrepreneur? by Michelle Wong Wei Hui (TP 077765)

 




Knowledge of risk management has been crucially important for entrepreneur to ensure that their resources , idea and finances have been protected and always secure to minimize potential of theft and losses. Enterprise risk management is a firm wide strategy, that uses a holistic approach to identify and prepare company from any harm that would have interfere with organization operations and causes losses. Compare to traditional risk management that leaves decision making to the top management, ERM sees a bigger picture, understanding how risks to each business unit interact and overlap, instead of each unit identifying their own potential risk (Hayles, 2024). This is important to ensure that all possibility of risk is taken into account and are not overlooked by the company in each business unit.

 

The 8 components that make up ERM , identified by COSO enterprise are organization’s core values in having risk aptitude when calculating and managing risks, setting goals in company risk tolerance and appetite, identification of risks and opportunities, risk assessments and categorization which would help decide the appropriate action to be done in dealing them, risk response and mitigation, check and balances to ensure response are done according to policies, information and communication and monitoring & call to action (Kumar, 2021). These components should be kept in mind by each entrepreneur and implement them accordingly when running a business.





References

Hayles, A. (2024, February 20). Enterprise Risk Management (ERM): What Is It and How It Works. Retrieved from Investopedia: https://www.investopedia.com/terms/e/enterprise-risk-management.asp

Kumar, A. (2021, March 18). Enterprise Risk Management Framework: 8 Core Components . Retrieved from Saviom: https://www.saviom.com/blog/enterprise-risk-management-framework-core-components/

 


Image Reference

https://www.johnheath.com/2019/04/01/the-most-important-risks-for-businesses-in-the-united-kingdom/

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