Week 5 - Fin 415

Risk Management Trends and Developments

\

FIN 415

January 16, 2011

Gregory Willis

The identification of risk is not always an exact science. Risk management practices must change as risks change when the business environment changes. There are new trends and developments in the field of risk management which include environmental risk management, risk modeling, and data security risk. These new trends attempt to overcome the future challenges of risk management strategies. Each of these trends must be evaluated to consider the pros and cons of each new trend. New trends can have significant implications to the business environment.

Environmental Risk Management

Environmental risk management is a new trend that attempts to address the new focus for companies to go “green”. This new trend helps companies to consider the risks of not meeting their social responsibility or the risk of doing business with another company which does not meet theirs. Businesses can no longer pollute the environment, disregard the safety of their products, and waste natural resources without being held accountable for their actions. One example includes banks which must consider environmental risks not only for their own organizations but also the organizations that they lend money to. Lending to a company that disregards environmental risks could lead to problems down the road when that company may not be able to pay their obligations (Delamaide, 2008).

There are several benefits of this risk management trend in form of a positive image for the company, reduced long-term costs, and limited losses from negative consequences of ignoring environmental risks. For example, if an environmental risk is ignored and over time it causes serious health risks, the company that ignored this risk could end up with significant liability lawsuits for failing to correct or prevent the problem. As previously mentions, the corporate image of a company can be improved or tarnished...