Introduction
Every business assumes certain risks at any point. While most people start businesses with an outlook of success, there is a chance that such businesses will not take off and succeed. Going on under such circumstances is assuming the aforesaid risks. While this is a very simplistic approach, risk management is much more complex. Dr. Kallman, a maestro of risk management has authored several articles regarding the techniques used in risk management. Other authors offer varying approaches and techniques to risk management. Heinz-Peter Berg is another scholar whose approaches to risk management are revered. The two scholars agree that businesses ought to identify and assess the risks that their enterprises assume. Such an assessment is important in the prioritization of these risks in order to inform the use of resources, capital or human. This paper will compare techniques recommended by Dr. Kallman and Heinz-Peter Berg,
Discussion
According to Dr. Kallman, businesses can manage enterprise risks by either acceptance or avoidance. Accepting the risk is a decision that is made in consideration of many factors. For instance, Dr. Kallman argues that a business ought to compare the variance, probability timing and impact of the risk with the acceptable ranges of the organization. Dr. Kallman gives an elaborate explanation of these dynamics. For instance, the scholar outlines circumstances when it would be sensible to accept risks. These include a low probability for losses, a small standard deviation, a short duration for losses and a small impact from the losses. Under such circumstances, it is not necessary to expend resources in order to control the risks (Bugalia & Kallman, 2012).
Alternatively, Dr. Kallman recommends avoidance of risks as another technique for risk management. In order to avoid a risk, an enterprise would have to forgo an action, or a business decision. According to Dr. Kallman, enterprises should take this action after performing a cost benefit analysis in order to determine that the risk tolerance of the organization is lower that than downside of the losses. I agree with the scholar on this position, especially after considering the principle of the opportunity cost. Heinz-Peter Berg brings interesting perspectives with his techniques of managing risks (Bugalia & Kallman, 2012).
Just like Dr. Kallman, he argues that a business person can either accept or avoid risks. However, Heinz-Peter Berg recommends that organizations exercise caution when accepting risks. This is because in the event that the events that trigger the risks occur, such an organization is left in a vulnerable position. For instance, setting up a business in a country that is experiencing political turmoil involves accepting a considerable amount of risk. It is not inconceivable that such a country could forge peace. Nonetheless, political turmoil could ruin the chances of the business taking off and succeeding (Berg, 2010).
Retaining risks is a technique of risk management for those organizations that deem it too expensive to control risks. Heinz-Peter Berg also recommends avoiding activities that trigger risks. However, and as noted earlier in the paper, all business activities and decisions carry an inherent amount of risk. Forgoing all activities that carry these risks would amount in a large amount of opportunity cost. If seen retrospectively, it is not very different from incurring expenses to control the various elements of risks. More precisely, the latter promises an outlay from the controlling the risks when compared to the former (Berg, 2010).
The other techniques of managing risks recommended by Heinz-Peter Berg include minimizing risks and transferring risks. While Dr. Kallman highlights these risk management techniques, he does not give them the attention that Heinz-Peter Berg does. In his conception, Heinz-Peter Berg posits that these two techniques are the most potent of the four in managing risks. Minimizing the risks in Heinz-Peter Berg’s conception involves controlling the probability that a risk will occur. For instance, one can minimize the risk of burglary by reinforcing the doors to the business premises. Business operators should identify risks and look for mechanisms of minimizing them. Heinz-Peter Berg recommends this technique because it is cheaper than accepting the risks (Berg, 2010).
On the other hand, transferring risks, as recommended by both scholars involves apportioning the risks to another person. In the conception of the two scholars, this is arguably the best technique for managing risks in an enterprise. Dr. Kallman suggests two ways of transferring risks. These include insurance and non-insurance approaches. The best example of this technique in use is vehicle owners purchasing a comprehensive insurance, or a businessman insuring his enterprise against perceived risks like fire, theft and political turmoil (Bugalia & Kallman, 2012).
Certain factors should be considered in risk management. One of the factors is whether the probability that a risk will occur can be reduced. This can be done through quality assurance preventive maintenance altering business processes and systems and management. Additionally, one should consider reducing the consequences of assumed risks. This can be done by contingency planning, relocation of resources and activities and reducing the exposure of the business to the risks. It is important to consider these factors when managing risks. They cut across different techniques of risk management (Berg, 2010).
Conclusion
Dr. Kallman and Heinz-Peter Berg are maestros in risk management. Their concepts embody the industry practices seen in the contemporary businesses. Risk management is very important in business. Owing to the fact that risks are inherent in all business activities and decisions, it is important for business people to learn risk management techniques. Dr. Kallman and Heinz-Peter Berg are good scholars to consult.
References
Berg, H. (2010). Risk management: procedures, methods and experiences. Journal of Reliability: Theory & Applications. 2 (17)1: 79-95.
Bugalia, J. & Kallman, J. (2012). Where are you on the risk management career path? Risk Management. 59, 5: 26-31.
