Smart Risk Management

1

What Risk Management Is and Is Not

Risk management is not simply having adequate insurance.

After reading this chapter, you should

• understand what risk management is truly about.

• understand the 5V£ steps of proper risk management.

• be able to get yourself into the correct frame of mind about risk management.

• recognise the importance of being innovative in today’s business world and global economy.

Getting Into the Risk Mentality

Exercise: Your Risk

To get you into the correct frame of mind, please write down a specific risk. Think of a risk that your organisation is undertaking or considering:

• What is the risk, both the upside and downside of it?

• Where is the greatest potential for costly risk?

• What makes this venture or activity risky?

• Why are you concerned about it (as the CFO, controller, or auditor)?

• What concerns do others in your organisation have around this particular risk?

• What are the implications or impact on your business or organisation if the risk fails?

Keep referring to this risk as you go through this book. You will be able to understand how the tools work by applying them to your specific risk.

No Insurance Selling Allowed

Whenever this topic is presented to management accountants or other business managers, the first thing they think is: “This person is trying to sell insurance.” Having adequate insurance coverage is only one small piece of risk management, as you will soon discover. In fact, in this entire book, only one small section is devoted to insurance ...