Revista Tinerilor Economiºti (The Young Economists Journal)

Revista Tinerilor Economişti (The Young Economists Journal)
Every manager must think about the risk management issue, because,
otherwise, the activity they perform will suffer.
Risk management involves:
Risk identification, an activity which aims to detect and record all risks;
Risk assessment represents the identification and analysis of the internal and
external factors which influence positively or negatively the entity’s objectives. This
activity being essential to the entity’s management must be consistently carried out.
Risk control involves initiating controls and risk response activities;
Analysis and reporting of risks aims to: identify the dangers from the audited
entity; preventing, eliminating or minimizing them; assessment of the internal control
activity of the audited entity; as well as management reporting.
Risk
identification
Analysis and
reporting of
risks
Source: Made by the authors after the source: Modern Risk Management Strategies for the
Romanian State Treasury
Figure no. 1 The risk management process
The overall goal of risk management is to help understand the risks which an
organization has to face so that they can be managed. Depending on the moment when
the risks are analyzed, there are pre-event purposes (before the risk materializes), when
the avoidance of the risk is pursued, and post-event purposes (when the risk has already
materialized), when the insurance of the business continuity, the company’s survival is
pursued.
The main advantage of a risk management program is the economic costeffectiveness:
managers are aware of the risks which the organization has to face and
they manage them accordingly, so they do not materialize. Risk management is an
obligation of a company’s entire team. This should be complemented by the existence
of a risk management department or at least of a person to work in this direction.
In some cases there may be a certain level of risk accepted, in accordance with
the specifications of a standard. It is a common situation in the financial-banking sector
or in the big companies which use the services of an external audit. The compliance
adds value to the image for the customers, business partners, etc.
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Risk
assessment
Risk control