Introduction

A special word about risk-taking is provided here.

There is much discussion in business circles about the need to incorporate the “upside” of risk into enterprise-wide risk management measures. This “upside” is not always comprehensively defined, and what risk managers are supposed to do with “upside” scenarios is often unclear. The commonly suggested approach is that risk managers should evaluate the potential “downside” of “upside” initiatives, i.e. what could go wrong with the enterprise's growth initiatives. For example, what eventualities could negatively affect our efforts at securing a new client?

This approach to the potentially positive outcomes of a given scenario is actually no different to any other risk management process. One must assume that all activities of an enterprise have potentially positive and negative outcomes. All should be subjected to the enterprise-wide process of risk management as outlined earlier. Although the inclusion of so-called “upside” activities into risk management initiatives may represent a progression for many risk practitioners, in fact their inclusion does not really complete the spectrum of risk in the enterprise.

An essential aspect of risk that is overlooked in most enterprises is the management of risk-taking – the development of risk-taking in the enterprise needs to be incorporated into the management of risk.

Risk-taking is generally left up to the self-motivation of an individual in the enterprise. At best, companies will encourage innovation, product development and unhindered decision-making. The company's propensity for risk-taking in a competitive environment is, however, often neglected. Certainly, it is rare for a risk management programme to have evaluated the company's strengths and vulnerabilities in relation to its ability to take risks.

Risk-taking in environments where a high degree of control is required is frequently inappropriate, e.g. nuclear power plants and air flight controls. But in the large majority of commercial enterprises, the competitive environment demands some degree of risk-taking propensity. An inability in this regard puts the enterprise at risk as fast-changing times demand risk-taking actions. This applies to the commercial enterprise as well as individuals in business. Rather than the occasional taking of risks, a concerted effort to grow this capability and to use it appropriately is needed.