Analyze and Explain the Need for Risk Management

Analyze and Explain the Need for Risk Management

Week 1 – Mini Project Option 3

Gary R. Mays

California Intercontinental University

MGT 620 – Risk Management

Dr. Donna Dimatteo

12 July 2012

Explain the Importance of Risk Management

Jorion (2001) defines risk as the volatility of unexpected outcomes, generally the value of assets or liabilities of interest. In contrast, the Department of the Army (July 2006) amplifies that before the outset of the global war on terrorism it became apparent that the future of the United States (US) Military assessments required a broadened understanding of the risk management process to encompass all operations and activities, on and off duty. This holistic approach focused on the composite risks from all sources rather than the traditional practice of separating accident from tactical hazards and associated risks. Subsequently, this refocusing and study clearly redesigned a new risk management approach that has been retitled as Composite Risk Management or CRM for short.

To put this in perspective and keeping with Jorion’s (2001) ideology of risk, the measurable value of an asset or liability in the US Military correlates that every single person is an asset and everything that is done whether in training, war or off duty has a measureable degree of risk that is weighed against either doing the assignment or not. This can be as simple as playing an organized sport to actually organizing a Division for combat.

Source: Department of the Army (July 2006)

The above wheel clearly lists primary decision making processes used for identifying hazards and controlling risks across the full spectrum of military missions, functions, operations, and activities. In addition, Egeland (30 January 2009) further explains that whether or not a project or customer requires a definitive need analysis plan to be an actual deliverable, the orchestration of such plan shall be used to illustrate the methodologies in...