A critical examination of the importance of effective risk management

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Table of Contents

1. Introduction.
2. Research Questions. 
3. Research Aims and Objectives.
4. Research Methods. 

4.1 Data Collection.

4.2 Data Analysis Tools.

5. Ethics and Risk Assessment
6. Limitations of the Research.
7. Dissertation Plan.

References.

 Introduction

The research purposes to examine the importance of effective risk management strategies in the case of a developing country i.e. India. In the view of Kaplan and Mikes (2012), different types of risks are faced by organizations including both macroeconomic and microeconomic risks. As stated by Hillier, Grinblatt and Titman (2011), these risks may include political risks, economic risks, legal risks, business risks and numerous other types of risk. Further, in the view of Cerutti (2010), any change in the factor that can affect the company in an adverse manner is recognized as a risk to the company. The risks can be both external and internal and the severity of each type of risk can vary based on the chance of occurrence and its potential impact on the business (Hoyt and Liebenberg, 2011; Kaplan and Mikes, 2012).  It is argued by Merna and Al-Thani (2011) that the intensity of different risks varies based on the industry and the situations prevailing in the micro and macro environment. It is quite possible that the intensity of different risks may vary with respect to time for different businesses.Case Study.

Case Study: As stated by Doherty (2000), to mitigate or remove the risks affecting the business in the short-run and long-run, many strategies are employed by the companies. There are some common strategies of the companies that have been observed when they face a certain type of risk. As analysed by Hillier, Grinblatt and Titman (2011), some of the organizations simply avoid the potential risks and believe that their impact can be mitigated once it has actually occurred. Further, as supported by Panaretou, Shackleton and Taylor (2013), other companies believe in mitigation of risk by employing the risk management process. However, some organizations believing in transferring the risk or accepting it (Rejda, 2011). A lot of research has been performed on risk management techniques in the developed countries, and it is found that most of the businesses in developing countries believe in risk management, and they follow a proper risk management process (McNeil, Frey and Embrechts, 2015). The risk management process comprising of four stages i.e. risk identification, risk assessment and analysis, risk control and monitoring of risks (Rejda, 2011).

Case Study In the view of Christoffersen (2012), the most common risk faced by the organizations is the financial risk, and the strategies employed to mitigate the financial risk include the diversification of investment, the hedging, and use of other financial instruments such as financial derivatives. However, these instruments need to be used effectively because these can lead to additional risk otherwise (Andersen et al., 2012). However, in the view of Menapace, Colson and Raffaelli (2013), the risk management carries importance for each and every area of business and each industry as well. They conducted research on risk management strategies employed by farmers to mitigate the risks faced in farming. It is concluded that the farmers face risks due to natural uncertainties and other wider factors, so they need to come up with risk management strategies as well (Menapace, Colson, and Raffaelli, 2013; Kimura, Anton and Lethi, 2010). It is further argued by Kimura, Anton and Lethi (2010) that the risk management tools and techniques are important regardless of the business model and nature of the industry in which the business is operating.

As per a research conducted by Henisz and Zelner (2010), the risks faced in developing countries are higher than that of the developed countries, and this includes both financial and non-financial risks. The reasons behind the higher risks faced by the emerging economies include the lower stability observed in those countries (Rua and Nunes, 2012). As the uncertainties grow in an emerging economy, the businesses’ performance also becomes volatile, and the political/social instabilities also lead to unexpected losses for the companies (Rua and Nunes, 2012). Case Study It is widely argued that the macroeconomic risks are higher in developing economies which ultimately lead to the risks for the businesses operating in that particular country. Therefore, highly effective risk management techniques are required to mitigate the risks in the emerging economies (Korinek, 2010). In accordance with Rua and Nunes (2012), the risk management tools, techniques and processes vary greatly among the emerging and developed economies as the uncertainties vary. In support to this, an earlier research by Henisz and Zelner (2010) states that the effectiveness of risk management techniques is still higher in the developed economies due to the highly volatile environment in most of the emerging economies. It is further stated by Henisz and Zelner (2010) that the business environment in developing economies is highly volatile due to the presence of some hidden risks in those economies. Every company needs to highlight those hidden risks which can potentially hurt their business in either short-run or long-run.

Though there has been extensive research on the area of risk management techniques it must be noted that limited research has been performed on the effective risk management techniques in the developing countries. Therefore, current research identifies this gap and aims to examine the effectiveness of risk management techniques in India. The reason behind selecting India for this research is that India is one of the leading emerging economies around the globe and still it is perceived that the risks faced in India are higher than that of the developed countries. Another research gap highlighted from the research studies analysed is that the past researchers have focused on identification and evaluation of risk management strategies that whether these are effective or not. Some of the researches of those past researchers have been discussed earlier in this section. However, this research will fulfil the gap and critically evaluate the importance of effective risk management techniques used to mitigate the risks for corporations.Case Study.

1.  Research Questions

Every research revolves around answering one or more pre-determined research questions. The research questions formed for this research are as follows:

• What are the risk management techniques employed by businesses in India?
• How effective is each of the risk management techniques employed in India?
• How important are effective risk management techniques in the emerging economies particularly in the case of India?

2.   Research Aims and Objectives

The research aims to critically evaluate the importance of the effective risk management techniques in India. The specific objectives of research can be broken down as follows:

• To critically analyse the risk management techniques employed by the businesses in India.
• To evaluate the effectiveness of each of the risk management techniques employed in India.
• To critically examine the importance of effective risk management techniques in India…