Risk identification is an underdeveloped art Discuss and include an Essay - 1

Risk identification is an underdeveloped art Discuss and include an overview of risk identification aids and techniques in yo - Essay Example Risk management is the concept that allows the management to look after future uncertainties like that of high inflation, volatility of market, recession, change in market demand, competitors, change in regulations, etc. Therefore it becomes a responsibility of the management to analyze and identify such risks. Otherwise, they may lead to financial turmoil and create issues like liquidity or even bankruptcy (Georges, 2013). Under the financial markets where uncertainties are high and investors expect to receive good returns, a diversified portfolio is maintained by the financial institutions. This is done in order to minimize the exposure to the risk by making investments in both equity funds and fixed deposits. It can also be said that risk management is the mitigation of the uncertainties, hence, allowing better decision making and prediction regarding the future outcome (Alexander, 2001). Risk Identification Risk management is part of the regular management processes and responsib ilities in the organization. It is an ongoing process that continues throughout the life of the project. It is often seen that entities face issues in locating and identifying the risks that may hamper their project or investment. Risk management is the two-step process. ... Other than few general terms of risk, they find it hard to locate the barriers that might hamper the success of their project or entity as a whole. Like risk management, risk identification is also a complete process and different methods or techniques can be used for successful identification (H. & J., 1999). With proper management, it is probable that most of the associated risks can be identified. Before discussion of the risk identification techniques or methods it is important to discuss its purpose, scope and process. Risk identification process Risk identification is a deliberate and a systematic process to identify and document the potential key risks that the organization as a whole might face. The objective is to understand what would be at stake. The risk identification process should cover all the risks irrespective of whether they are in control of the organization or not (Lubka, 2002). It is a diverse process and requires inputs from all the stakeholders of the organiza tion, whether internal or external. Following briefly highlights the risk identification process: Risk identification usually starts before the project is initiated and the number of risks increase as the project matures through the lifecycle (Merna & Al-Thani, 2005). Identification can be of both, operational risks that are associated with the organization as a whole or project risks specific to the project. Methods that the management would be using to identify the risks and set of different sources that would be used to gather the information. It is important that set of risk identification tools and techniques is used Identified risks must be documented and the probability of occurrence of such event evaluated in order to analyze the resources that would be