Corporate risk refers to the liabilities and dangers that an organization faces. Corporate risk is even more important during more difficult times in the economy. When the economy is not so forgiving, risk management teams will take fewer chances. These more trying times can lead to a decrease in credit availability and less spending overall. When planning an organization's current and future position, risk management is an important function. A properly planned risk management program will give an organization peace of mind.
The aim of this paper is to define the following corporate risk terms:Ã¢ÂÂ¢Organizational riskÃ¢ÂÂ¢Business riskÃ¢ÂÂ¢Financial riskÃ¢ÂÂ¢Competitive riskÃ¢ÂÂ¢Reputation/Damage RiskÃ¢ÂÂ¢Statistic riskOrganizational RiskOrganizational risks include threats, harmful effects or tribulations which can occur in an organization. These risks can result from one of the two sources:Ã¢ÂÂ¢outside of the company, which are external risksÃ¢ÂÂ¢inside of the company, which are called internal risksExternal risksThe external (outside) risks derive from changes in the atmosphere of the company, whether it is economic, political, sociological or technological changes, which can have a less than favorable influence on the intentions and the policies of the company.
Internal risksThe internal risks can result either from processes, or from the management information. According to Merna and Al-Thani, 2008, a poor infrastructure can result in weak controls and poor communications with a variety of impacts on the business. Good communication links will lead to effective risk management.
Business RiskWhen a company is either unable to fully function or can only function unproductively, that leaves a risk of financial loss in terms of lower business revenues or increased costs. "Broadly defined, business risk management is concerned with possible reductions in business value from any source" (Harrington and Niehaus, 2004). The corporation's value to its shareholders, which is reflected in the value of the organization's common stock, really depends on...