Question

Risk management is not rocket science-it cannot be, since the past does not repeat itself on a sufficiently reliable basis. Future risks cannot be understood without examining the economic forces that shape them…..However, understanding risks makes sense only if that understanding is used to create value. This means that risk management cannot be done independently of an understanding of the profits that come from taking risks.’ [Rene Stultz, ‘Why Risk Management is not a Rocket Science’, Financial Times, 27 June 2000] 
Do you agree/ disagree with this statement. Explain your answer.

Answer 1

The statement here indicates the importance of assessing real time information and then predicting Risk Management models.

Risk management generally refers to the exercise by management of companies and the political circle. To be able to control risks or uncertainties which may arise so as to be able to ensure, that the objectives of long term growth or profitability or sustenance are not violated.

Generally, through risk management, the companies tend to lower their chances of failure in the market place because they have analyzed situations and are able to go ahead of time and take relevant decisions for their business which enables them to foresee and be able to tackle tough times by formulating policies or adopting strategies which allow for easier survival for them.

The fact that risk management is not rocket science as explained in the question is true. Risk management requires the use of past events which it true but however not one strategy can be formulated on the basis of past events since these strategies adopted today may or may not be able to deal with the situation.

Therefore, it is wise for companies to analyses situations than to blindly follow a strategy based on the fact that in the past these were successful.

The business environment today, is nothing like the past. World economies are more connected than ever offering greater financial and management risks. Therefore, a historic view of Risk management is small in approach and does not involve external contingencies.

To enable proper and uniform risk management therefore, conditions should be met which allow for risks to be relatively lower and the government can only then be able to deal with the situation respectively.

Please feel free to ask your doubts in the comments section.