Risk is a fact of life since life is constantly changing and is uncertain. Today’s economy requires companies to identify and respond more quickly to changing risk profiles, therefore, all management is essentially risk management. Many risk management activities are well defined and accountability has been assigned. For risks that have not been defined/assigned, risks can “slip between the cracks” and/or be managed inconsistently due to individual perceptions of the significance of the risk. All of this can be avoided with the right risk reporting process.
This guide explains the current scenario of risk management, provides an overview of risk indexes, and discusses developing a risk index. It provides insight on the following: meaning of business risk, types of business risks, prioritizing business risks, room for improvement from board members’ view of risk reporting, challenges faced by top management, meaning of risk index, a single-number snapshot of organizational risk, a typical risk index methodology, components of a risk index, need for a risk index, and linking risk to performance to strategy.