Conventional risk management has focused on avoiding the risks to a business strategy, rather than understanding and managing the risks of the strategy itself. While the protection of existing assets is necessary, it is not sufficient for competitive advantage. Unfortunately, when risk is defined by an organization only as the failure to adequately protect existing assets and prevent loss (unrewarded risks), the rewards of reasoned, calculated risk taking (rewarded risks) are often neglected at potentially high cost to the company’s future success. Avoiding the risks of non-compliance with regulations, operational failures and lack of integrity in financial reports are essential activities but are not sufficient for competitive advantage, and a diet of pure risk aversion likely will lead to extinction.
Authors: Frederick Funston, Henry Ristuccia, Stephen Wagner
Source: “Deloitte Review”
Subject: Risk Management
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