Risk management: theoretical framework

Abstract

The complexity of the economic system and the large mass of flows through the value chain favor the emergence of risks and undesirable events with harmful and detrimental repercussions on the proper functioning of any process, which must be taken into account in the decision-making process and which becomes a priority for any economic actor. These risks can take the form of various types of threats caused by the environment, technology, people, organizations and politics. However, they always have unfortunate and, in most cases, uncontrollable consequences. Therefore, all economic actors are involved in implementing risk mitigation and extenuation strategies within the framework of a risk management program. The objective of implementing risk management is to apprehend risks, understand their potential consequences and reduce their systemic effects associated with the chosen domain to a level acceptable to the community. We have developed this paper to clarify the basics of risk management through a new suggested literature review and to provide managers with a baseline and a sample process to follow. This paper reviews the theoretical foundations of the risk management discipline, focusing on its development and examining its best practices. The paper also pays particular attention to the impact of risk on the organization in terms of resilience and performance, and to the risk management process as a formal and logical method for implementing risk management practices.

JEL Codes : D8; G32 ; D81; L25

Type of paper: Theoretical Research