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RISK MANAGEMENT
Risk and the business environment
• The taking of risks allows the entity to be more competitive
and to generate higher returns, e.g. launching a new
technologically advanced product even though there is
uncertainty whether customers will buy the new product.
• Benefits could be both financial, in the form of higher returns or
reduced cost, and intangible, such as gaining more valuable client
information to be used for future products.
• Risk-taking could also result in losses. However, greater risk
should be balanced by a greater expected reward. It is thus
important for every entity to follow a strategic risk-
management process.
• Here, value could be added by controlling the probability of
occurrence, the potential impact of unfortunate events, and finally,
by maximising the realisation of opportunities.
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