Smart Risk Management

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Step Three—Analyse the Firm’s Ability to Handle Risk

After reading this chapter, you should be able to

• describe to others the impact that corporate culture has on risk management.

• look for specific risks in an organisation’s critical strategies.

• describe, from a self- assessment, the level of accountability that people display in your organisation.

• describe for others how the three budgets, the operating plan, and the financing plan are used in managing risk.

• apply the risk-by-identification tool to analyse a specific risk.

• use the ideas in this chapter to foster a culture that balances risk taking with risk exposure.

Case Study

Analysis of Amazon’s Ability to Take Risks

Another example of an ultimate risk taker is Jeff Bezos, the founder and CEO of Amazon.com. Jeff is confident that his organisation can take big risks and survive. For example, Amazon ventured into the furniture business, even though that proved to be unfeasible at first. Today, Amazon uses its website as a pull-through for vendors such as Art.com. Jeff’s company started the Z stores, and now that risk brings tremendous revenues without much cost. Jeff and his team continue to foster relationships with other organisations, such as Toys “R” Us and Martha Stewart Living. Some of these partnerships have succeeded and some have flamed out, but Amazon continues to take big risks within the framework of its business model.

Back in 1997, so-called experts predicted that with the launch of BarnesandNoble.com, Amazon ...