Turning Risk into Reward: Navigating a New Course toward a Return on Risk

By Morris, Gregory | Risk Management, August 2005 | Go to article overview

Turning Risk into Reward: Navigating a New Course toward a Return on Risk


Morris, Gregory, Risk Management


Is it time to think differently about risk? What if the risk perspective was inverted and looked at not as something to avoid, but as something that to manage for competitive gain? What if, in today's litigious environment and lingering hard market, well-managed risk became something that could be leveraged for financial reward?

Measuring risk for a return to the organization is a revolutionary new approach. Yes, it is possible; the map, the compass and the navigational tools do exist to chart a course on these new seas.

Why a new approach? Risk managers, C-suite leaders and consultants agree: the business of risk management has changed radically in recent years. The days when the job simply meant buying a risk transfer policy for a competitive price are over. Every major aspect of an organization--its finances, its operations, its products and its human capital--either impacts or is impacted by risk, and risk management is becoming a key strategic line item on the balance sheets of organizations large and small.

How well an organization handles today's ever-increasing complexities of risk--especially compared to other organizations in its space--is about much more than the simple mitigation of loss. When risk is managed and reduced, the results are not only internal financial and operational advantages, but a measurable competitive advantage that affects every area of the company, from the costs of risk in the marketplace, to employee morale and retention, to the company's position in the marketplace.

Today's complex challenges require a new approach. With the right system, process and tools, risk can be fundamentally turned around from its traditional role as a "necessary evil" of business to a positive center of opportunity and gain for organizations of every size. What is needed is a next-generation solution that combines:

* a global approach to risk pioneered by enterprise risk management

* the technology and resources to formulate "predictive data," and then turn that data into advanced tools for benchmarking and measurement of returns

* the unbundling of services so that these solutions would be feasible for all organizations

* using analysis and benchmarking to demonstrate how superior risk management specifically improves the bottom line

A New Course

The strategic approach of managing for a return on risk combines these elements into a system that enables companies to leverage risk for competitive advantage and manage a portfolio of risks in an interconnected environment. By tying risk management to process improvement, a return-on-risk approach links operations, finance and marketing to produce the holistic, systemwide risk management approach that is the promise of ERM.

In order to realize this promise, however, a return-on-risk approach must be built around several key elements:

* the data for analyzing and prioritizing risk drivers

* advanced tools for benchmarking

* remedial guidance for operations and finance

* tools for measuring progress and comparing the firm to others in its local, national and international markets

These measurements allow the company to measure its degree of risk to competitors and to leverage superior ratings into financial and operational gains. Furthermore, with these factors working in concert, the return-on-risk approach shifts the whole framework of risk management from negative to positive, leveraging risk for opportunity and competitive advantage in an increasingly complex environment.

Unlike earlier programs in ERM, this process is entirely modular. It recognizes that every positive step that lowers costs and reduces claims contributes directly to the bottom line and indirectly to other parts of the organization. The more steps that are taken, the broader the results will be, ultimately yielding exponential improvement.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Turning Risk into Reward: Navigating a New Course toward a Return on Risk
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.