Risk Management: The Uncertainty in Information

June 1, 2017 | Views: 2667

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We often use the word “uncertainty” to refer to a doubtful thought because there is a lack of information about what will or will not happen in the future so, we often use uncertainty and risk together. For example, when someone says “I am uncertain what grade I am going to get in the exam”, that means there is a lack of knowledge regarding the outcome.

Where there is a risk, uncertainty exists. It is possible for someone to feel uncertain in a situation where there is a possibility of loss.

Operational risk management is the risk of loss resulting from inadequate or failed internal processes, people, or systems and it may be a result of external processes or events. Its success depends on how complete the identification process is.

There are some factors which operational risk management depends on:

  1. The Risk Management System; it should not slow down decision-making processes or reduce business outputs
  2. Risk managers; they should not be the managers of business units
  3. Risks should be managed at an appropriate level within the organization

The culture which should be developed to reward the exposure of risks when identified not to encourage the employees to hide the risks

People risk is described as a combination of employer behavior that may affect his staff and their efficiency, health, and safety. It can also affect their loyalty when doing their duties.

There are three levels of severity of the impact on people risk; the lowest level covers reducing profitability while at the second level, we may find a negative effect on the whole organization and its productivity and reputation as well. The worst level is the eventual collapse of the organization and its business because of actions of one or more employees so, it is important to lead the employees because they are the source of success in any business. We measure the efficacy of HR department by absenteeism rates, employee turnover and accident rates that include health and safety besides, customer satisfaction. All that means that people risks are broader than the just efferent leadership of the staff because they include health and safety; it is enough to know that costs of those risks have been calculated at about 3.8% of the market value of the 500 largest EU and US companies.

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