To borrow from the saying of someone famous, ‘to tire of risk is to tire of life’. Risk is woven into the very fabric of life, and although risk can never be completely mastered, it can be managed.

The field of risk management is fascinating and has a multifaceted heritage. It incorporates many aspects of psychology. Millions of people involved in finance around the world consider themselves risk practitioners. Environmentalists, safety officers, security managers and fire experts all operate in the field of risk management. In the corporate world, staff such as legal officers, company secretaries, corporate governance officers and insurance managers all work to find solutions to risk every day.

The practices of risk management have been highlighted by a number of recent developments. The terrorist attacks on the USA in September 2001 brought to the fore aspects of risk management such as surveillance, intelligence, security management, crisis management and contingency planning. The dramatic bankruptcy of energy giant Enron in the USA in 2002 generated questions related to risk management issues such as corporate governance, internal controls, auditing practices, transparency and shareholder reporting. Even the enormous financial crisis faced by Argentina in 2002 raised questions about risk management issues such as liquidity, ability to service debt, political risks and currency risks.

These events did not necessarily suggest that risk management as a management function was found wanting, but that its principles were not always effectively applied. Why?

If there is one criticism that can be levelled against the field of risk management, it is that the discipline is somewhat fragmented. Indeed, the fields of financial risk management, pure risk management, risk-taking psychology and corporate governance are so disparate in the way that they function that it is difficult to recognise risk management as a unified management function at all. Part One of this publication provides a ‘rough guide’ to the current field of risk management, complete with an explanation of terms, and highlights some of the difficulties encountered in this field.

Risk management is now changing in order to provide integrated solutions to risk. Practitioners from disparate risk disciplines are working together now more than ever before, and the popular concept of ‘enterprise-wide risk management’ has emerged.