Corporate Risk Management, 2nd Edition

8

Risk Management at Strategic Business Level

8.1 INTRODUCTION

This chapter outlines business formation and the differences between private and public limited companies. It is primarily concerned with SBUs’ functions, strategy and planning. Risks specific to the SBU level are also outlined.

The corporate body operates separate SBUs which are often managing many different projects, therefore portfolio theory is described along with a brief example using five different investments in separate markets and identifying their associated risks. Matrix systems and programme management are also discussed.

8.2 DEFINITIONS

French and Saward (1983) describe business as:

The activities of buying and selling goods, manufacturing goods or producing services in order to make a profit.

French and Saward (1983) also define strategy as:

A general method or policy for achieving specified objectives.

Collins English Dictionary (1995) defines a business as:

A commercial or industrial environment.

The present authors believe strategy to be a set of rules which guide decision-makers about organisational behaviour and which go on to produce a common sense of direction. For the purposes of this book the authors believe strategic business management can basically be summarised as the management of SBUs.

8.3 BUSINESS FORMATION

The birth of a business is different to that of a corporation. A business often transforms into a corporation over time through acquisition and growth.

The authors believe ...