Your firm’s Risk Profile is a function of two things, the Opportunities for risk taking and your capabilities. Using your capabilities, you will choose from your opportunities for risk to get your gross risk exposures. Then your capabilities will again take over and treat your risks to bring them to the net risks.
So your capabilities make two contributions to risk management.
A firm with strong capabilities will find the best opportunities from the choices that the firm has based upon its access to sourcing risks. Those opportunities will have the most favorable risk reward potential.
Then the strong capabilities will seek to trim the risk through risk treatment, giving up as little return as possible while offsetting or otherwise reducing returns as much as possible.
A firm that wants to increase its capabilities has three choices: Acquiring, Partnering or Training.
Risk capabilities can be Acquired in bulk by acquiring a firm with good capabilities, or by hiring one risk professional at a time. With Partnering, the firm gets help from the partner who could be a consulting firm or an intermediary. By using Training to acquire capabilities, the firm seeks to add capabilities to existing staff.
Each possibility has different short and long term costs and each has different levels of dependability and time to start up.
Tags: Risk ManagementYou can comment below, or link to this permanent URL from your own site.