Introduction to risk

Risk, in all its many guises, is everywhere. The challenges of competing in today's global market have resulted in increased organisational complexity and a greater risk to the Board of losing strategic control. The level of tax risk has risen as a result of increased pressure from investors, the general public and revenue authorities. Extended, complex supply chains bring a risk to reputation.

Companies' growing dependence on IT inevitably introduces a host of technology risks. Businesses also need to be aware of the risks that result from operating within a constantly changing environment. Developments in corporate governance are forcing companies to demonstrate the quality of their internal controls and demand more of their internal audit function. Sarbanes-Oxley s404 has raised the bar for internal control programmes of SEC registrants and many of them have started recognising benefits of controls optimisation.

However, it would be wrong to believe that all risk is bad. It is vital to achieve a balance between control and competitiveness. Negative attitude to risk can hinder business success – in R&D no new products would emerge and in M&A companies would never buy new businesses. Indeed, there is an enormous upside to risk and businesses can only make money by taking risks.

The key is knowing what risks you are taking, how to measure them and how to manage them if they turn from risk to reality.