Question

Introduction to Business Law:

1.) What is the importance of risk management to the business enterprise?

2.) How does insurance aid the enterprise in managing risks?

3.) Describe the value of having a will or a trust.

Answer 1

1. Risk management is the study that involves the examination and understanding of various risks incidental to the conduct of our Organization's business and functions. Upon analyzing the risks in a business enterprise, the avenues could be ascertained in order to plan for the resources to monitor and control such risks and to the extent a risk can be mitigated or minimized, could also be established. In this regard, the possible future of the business enterprise is that there through risk management, the business enterprise could undertake a strategy for the avoidance of the risks to the extent possible, controlling or mitigating the same pertaining to the system, accepting the risk and preparing to face the same accordingly and transferring the risk to such other party who are more capable than us to manage the same. The Risk management may also help foresee certain opportunities in the future that could be taken to the Business enterprise’s favors, by proper planning and deployment of resources thus helping to capture the market in long-run by such enterprises.

Hence for any business enterprise, the basic ways to manage risk would be by undertaking a definite Risk management program. Hence the Management strategy necessary to create a type of culture that promotes the prevention, identification and resolution of issues associate with risk could be as under:

a. Active Prevention strategy for the internal risks: Usually internal risks are the risks within the organization that could be controlled or eliminate in total. These risks could arise due the employer-employee unauthorized or illegal terms of contract, ill-behavior of certain employee with other employees or stakeholders of the organization, etc. In such cases, the management strategy should be such organized that it sets a certain level of tolerance limit failing which, necessary controlling actions could be exercised on the part of the Organization. For example, in the company American Express (Amex), they Organization does not believe that the knowledge goes wasted that they invest into the employees who retires from this Organization after seeking the technical know-how skills as well gaining an in-depth industry experiences from Amex. Rather, the company’s Management strategy allows a private program that enables the current employees who soon going to retire from the Organization to given upon certain set of non-critical responsibilities and instead spend more time in providing training and sharing experiences about the employee’s long association with Amex. As a result, the employee would end up retiring in phase rather than giving up all his responsibilities together along with enjoying the same pay packages while still in the Organization although not assuming all sets of responsibilities in a complete form.

b. Management of the Strategic risks is those risks that an Organization willingly accepts with the view to win some strategic advantage over others in the market. When the Company intends to gain through various organizational activities in a systematic form, it also needs to assume a high level of risks. Various strategies could therefore be formed in this regard in order to ensure maximum benefits to the Organization keeping in mind the gravity of the risk involved. However, these risks are usually a calculated one unlike the external risks which is completely out of our control, therefore, making the strategy planning more desirable in nature. One of such potentially risky activity was undertaken by an Indian oil and petroleum company called Bharat petroleum when it decided to explore the area surrounding the Gulf of Mexico owing to the high value that it could avail from the oil and gas of that zone.