Paper instructions:
Discussion: Risk Management: Trade-offs
Think of a situation in your life when you identified a risk and came up with a plan to manage that risk. Perhaps you purchased car or health insurance, or anticipated another potentially costly or harmful situation. How did you decide whether the cost of implementing your plan was fair? Did you ever think that the risk was so slight that the cost and time you would devote to preventing it might not be worthwhile? Organizations, too, weigh the trade-offs between the cost, time, and effort involved in preventing a risk and the potential cost if that risk were allowed to happen. In this Discussion, you will revisit an article from Week 1 in order to do your own analysis of the balance between costs and benefits inherent to any ERM plan.
With these thoughts in mind:
Post by Day 5 a response that answers the prompts for this Discussion.
Review the Stulz article and discuss the financial losses and risk impact associated with corporate cost.
- Evaluate the trade-off of preventive costs and the financial impact of not mitigating risk, as described in the articles that are located in Week 1.
- Determine if the preventive costs are worth it, given the probability of the occurrence of an undesirable outcome.