In Chapter 22,JAAInc. faced various risks that affected the operations and profitability of the company. In response to that, the company engaged in risk evaluation process where gaps in risks managem
Chaitanya Krishna Bapana
Week 10 - Discussion
COLLAPSE
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The risk attitudes play an important role in firms for the choices made by the decision makers for the firms future performance. There will be lot risks with the attitudes who has the past experience and who doesn't have any experience in ERM development this will impact directly when there is no understanding between two types of attitudes for the company objectives. Hereby, one has to take into consideration that the correlation between risks and returns is typically positive. Risk management strategies have to be tailored to each individual firm. They have to be based on insights on the relationship between a firm's value and risky future returns. Due to this possibility, the company can undertake more core business risks that the firm has competitive advantage in bearing. We can therefore assume that companies with ERM should be more effective in undertaking business risks necessary to achieve their goals, while they are better protected from financial risks. The absence of empirical evidence about ERM's impact on the company's fundamental goal - shareholders' value enhancement - is a limitation to the growth and development of ERM as a discipline. Considering that ERM has the longest tradition in the United States (Lam, 2001; Meulbroek, 2002)
Reference
Marc, M., Sprčić, D. M., & Žagar, M. M. (2018). IS ENTERPRISE RISK MANAGEMENT A VALUE ADDED ACTIVITY?
Schubert, R. (2006). Analyzing and managing risks - on the importance of gender differences in risk attitudes.
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Shiva Kumar Pagadala
week 10 Discussion
COLLAPSE
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There are many experiences that a person who is in charge of enterprise risk management development experiences hence affecting the risk attitude of the company. Effective enterprise risk management is implemented by individuals hence the risk attitude of these individuals has a large impact on the attitude towards risk for the company. They experience a lot of issues both positive and negative when they are developing the ERM.
Some of the experience that a person developing ERM include risk-averse where the developer of enterprise risk management is uncomfortable and uncertain, has low tolerance and in case of any risk, he or she seeks for safety. The person might have the tendency to over-react when faced with negative risk and have an under-reaction towards a positive risk.
This kind of experience is likely to affect the attitude of the company towards enterprise risk management. The company might end up not wanting to adapt to ERM because of the past experiences faced during the development of enterprise risk management. The company might also have a negative attitude towards the risk especially in a case where it has spent a lot of cost in developing one.
For a company to manage its enterprise risk management in an effective manner it needs to create a culture that is aware of risk in the entire company (Bromiley, et al, 2015). The company should provide tools and techniques that will enable all the employees to have a positive attitude towards risk. Proper training should also be done. The company also needs to understand that enterprise risk management is a process that is ongoing so its development does not stop.
An enterprise risk management program that makes use of continuous data that is collected and monitors the data to come up with a bigger picture is effective for the company and impacts the risk attitude of the company (Yang, Ishtiaq, & Anwar, 2018).
References
Bromiley, P., McShane, M., Nair, A., & Rustambekov, E. (2015). Enterprise risk management: Review, critique, and research directions. Long range planning, 48(4), 265-276.
Yang, S., Ishtiaq, M., & Anwar, M. (2018). Enterprise risk management practices and firm performance, the mediating role of competitive advantage and the moderating role of financial literacy. Journal of Risk and Financial Management, 11(3), 35.
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