The Importance And Benefits of Managing Risk

It is imperative that we should understand the importance of risk management. In fact there are numerous benefits derive from proper risk management. Lets look at some of the following benefits:



  • Once we have established a sound risk management culture into the organisation’s business framework, it promote productivity in the sense that senior management and line managers can focus more on their primary responsibilities instead of squandering resources on “fire-fighting” the challenges that may arise due to the lack of such practices,
  • Its strengthen the business planning processes by allowing decision-makers to make contingency plans to avert possible “ mishaps” thereby producing more realizable opportunities for the organization on the whole and leading to increased shareholder value,
  • It’s enhance shareholder value as it assist in reducing expenses as there are many direct and indirect cost of risk.


  • Management is able to avoid paying the direct and indirect of risk namely:

·         For Direct cost of risk, it comprises: cost of replacement, loss of revenue, damages paid.

·         Indirect cost of risk comprises: loss of market, loss of reputation, management time, paid absence from work, effects on insurance premiums, product or service recall, write-offs of plant or material, medical expenses and effect on morale,


·         It’s provide a sort of peace of mind for senior management,

  • It’s might be matter of business survival or failure,
  • The reputation of the organization for social responsibility has been enhanced in relation to another organization who ignores risk management which affects the overall community or society,
  • With the current emphasis on good corporate governance by outsiders like investors, it’s a must that risk management is a tool to convince outsiders that the company has what it’s take. The presence of sound and effective risk management and controls systems inspires confidence in the investing public and others.
  • It safe-guard an organization’s credibility and goodwill.


Click on the article on The Different Type Of Risk


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