Question

Explain how an organization determines if it is spending too much on risk? At what point does managing risk become wasteful? Justify your opinions with a specific example.

Answer 1

Explanation:

An organization may be performing ineffective risk management when it does not meet the necessary requirements for the control and supervision of uncertainties, that is, it does not turn risks into opportunities to generate positive results for the company.

Risk management aims to minimize the risks arising from productive activities and uncertainties. For this, the organization must develop a set of practices and policies that are aligned with its internal and external values, maintain transparency, value human resources and correctly allocate materials so that all organizational processes flow smoothly.

When a company, for example, manages environmental risks but does not share values ​​with all stakeholders, this constitutes ineffective risk management for the organization, as it does not promote the ideal continuous improvement that management proposes.