Risk management benefits
1. More effective strategic planning
Effective strategic planning means the objectives set by the companies suit the company’s operations capabilities and the planning helps the company preserve its values and seek improvement. Risk management means coordinates activities to direct and control the organization with regard risks. The coordination between activities helps the company to communicate and understand the business activities as a whole, this will let the company understand the operation capabilities better and enable the company implement realistic strategic plan into organization
2. Better cost control
- risk management set a objective acceptance of risk level. Company has a guide to manage risk and control negative consequence.
- The cost benefit thinking is addressed by the risk management. In the past , companies think they have unlimited resources. Companies tend to transfer risks by buying insurance. Nowadays, risk management does not think transferring all the risks by insurance is enough as the competitiveness is increasing . Risk management provide more solutions, such as , avoiding risks, loss control, transfer part of risks not only by insurance but also by hedge funds and retain some risks( active retain is advocated). Company can save a lot of money by compare cost and benefit of different ways.
- The risks management requires forward thinking. This will help the company to prevent downside risks and its bad consequences; also this will help company to catch opportunities to avoid opportunity cost .
- greater trust, openness and transparency can be obtained by the company by applying risk management .Risk management requires company communicate with stakeholders(suppliers ,customers ,government, employees and shareholders) and different levels in the company. This will increase the supply chain efficiency and effectiveness. Also lower financing cost and regulation cost ( carbon...
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