CORPORATE RISK MANAGEMENT Essay Example | Topics and Well Written Essays - 1000 words

CORPORATE RISK MANAGEMENT - Essay Example Companies incur a substantial amount of cost in the management of the risks (Ridley & Channing, 1999). Companies hire experts in order to mitigate the risks associated with its operations. The amount of risk to be mitigated varies from company to company and operation to operation. The dependency is related with the intensity of the risk as the risk shall be high when it affects the company’s operation at maximum (Agrawal, 2009). Although the risk is attached with every operation of the company but there are some certain areas in which the concern of the risk is substantial and companies’ need to focus more upon those. The costs associated with risk management is dependent upon both, the intensity of the risk and the value of that risk. The intensity and value tend to differ in every operation and every company. Some companies are more concerned about stock out than other whereas some companies are more concern about the halt in the company’s operations. The mana gement of risk is carried out with utmost focus and importance when an investment is to be made. A decision to choose from many investments is to be made and usually the investment associated with least risk is preferred over others. The basic goal of a company is the maximizing the wealth of its shareholders. A companies manages all risk in such a manner that the company is not derailed from its progress towards its goals. For the pharmaceutical companies the intensity attached with the risk of the new drug is much intense as it has many implications of the respective legislations (Ncbi.nlm.nih.gov, 2013). The high intensity of risk demands high risk management as in the failure of managing the risk shall be leading to the closure of the company. Pharmaceutical companies have more risk intensity than that of other companies as the products of the company is medications and thus greater restrictions and regulations are applied to them (Brown & Mannan, 2004).  . Costs in risk manag ement are both qualitative and quantitative as per the objectives of the company. Companies hire expert in management and they evaluate the procedures and the risks involved in it and thus have to incur costs as in terms of salaries of the hired experts. The companies incur cost as direct salaries but the time that is consumed in the process is the cost that the company bear in terms of lateness in the selection criteria as the time value of money is considered to be deteriorating. In short term this cost is of intense importance as the time is short as when the selection is done and the company has to over go with the selected option and carry out the procedures. Whereas in the long run the cost of delaying as because of the time taken in the appraisals and selection is considered important as well where the deteriorating value of money is considered over the time (Jorda?o & Sousa, 2010). Risk management is concerned with the measurement of the risk and the intensity of the risk wh ich is a time consuming method (Krause, 2006). The returns upon the project risk is associated with the market rate of return. The comparison between the two is done in order to appraise the project. There are high probabilities in certain cases where the company sees the project feasible as less risky and afterwards due to the