Strategic Risk / Uncertainty

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Risk is defined as the assessment of the severity, amount and nature of losses which an action may incur

Uncertainty is the limits and precision and the extent of knowledge about an event or subject

Categories of Risk
Strategy Changing Patterns of Demand Exogenous
Operations Manufacturing/Process Systems Exogenous
Economics Changes in Interest Rates Exogenous
Hazards Natural Disasters Exogenous


E.g. Bhopal was an eg of man made risk of not adopting to new technologies (Endogenous)

Organizational/Managerial Risk
Organizational Risk Factors
Complex/Simple Environments The More Complex the More Risk
Scarcity/Munificence Abundance provides a context where greater risk can be taken
Managerial Risk Factors
Aspirations/Expectations Higher expectations mean better performance is more likely and less risk
Economics Changes in Interest Rates
Top-Team Characteristics Higher levels of heterogenity is likely to promote risk
Ownership Managers who do not have equity stake are less likely to take risks


  • Managerial Risk is where managers make choices associated with uncertain outcomes
  • Organizational Risk is where orgs face volitile income streams associated with turbulent environments


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