Risk management is essential to the success of every company

By | November 27, 2016
Risk management is essential to the success of every company

Risk management is essential to the success of every company


Risk management is essential to the success of every company

Revised July 1, 2023

Risk is an inherent aspect of business operations, representing the likelihood of a loss occurring when a threat exposes a vulnerability. While organizations need to take risks to thrive, they must also recognize the importance of managing those risks. To effectively mitigate risks, it is crucial to understand the threats and vulnerabilities involved and take appropriate measures to reduce vulnerability or minimize the impact of the risks. Consider the following risk-related concerns:

  1. Compromise of Business Functions: The activities performed by a business to sell products or services can be negatively affected by threats. If these essential functions are compromised, the organization may experience a significant loss of revenue.
  2. Business Assets: Business assets encompass anything of measurable value to a company, which can be tangible or intangible. This includes items such as repair costs, lost revenue, loss of future revenue, cost of gaining customers, customer influence, IT system equipment, network equipment, software, and data. Protecting these assets is vital for the overall well-being of the organization.
  3. Driver of Business Costs: Risk management controls add an additional cost to running a business. While managing risks is essential, it is crucial to strike a balance between risk mitigation and cost-effectiveness in order to optimize business operations.
  4. Profitability vs. Survivability: Profitability reflects a company’s ability to make a profit, while survivability refers to its ability to withstand losses resulting from risks. It is important to allocate funds for risk mitigation while considering their impact on profitability. Risk management should involve weighing the cost of risk controls against the potential threats that can jeopardize the company’s survivability. Over-investing in risk controls can hinder profit generation and fail to adequately address significant threats, potentially leading to business failure.

The National Institute of Standards and Technology (NIST) Special Publication 800-30 provides a guideline for applying risk management frameworks to federal information systems. This publication emphasizes that organizations heavily rely on information technology and systems to carry out their missions and business functions. Recognizing the growing danger posed by threats, it is crucial for leadership at all levels of an organization to prioritize the management of information system-related security risks and implement well-defined risk management systems.

In summary, since risk can result in losses that negatively affect business functions and even cause a business to fail, implementing a comprehensive risk management program is essential for the success and sustainability of every company.

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Note: This article has been drafted and improved with the assistance of AI, incorporating ChatGPT suggestions and revisions to enhance clarity and coherence. The original research, decision-making, and final content selection were performed by a human author.


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