Corporate Risk Management

1. Introduction:
In current world countries are struggling for secured future. Due to global issues like
covid pandemic, shortage of supplies and global warming, economy situations of every
country are unpredictable. In this scenario corporate business try to run their business
fluently with the help of risk management department. The corporate risk management
try to avoid future damages by identifying and evaluating all possible hurdles. They
tackled it with the help of precautionary strategies to minimize adverse impact of these
risks on the productivity of business.

According to Cagno (2007) corporate risks analysis is highly complicated because they
occurred due to methodical and systematic circumstances. Multiple factors involved in
identification of upcoming hazards.

2. Aim of study:
Purpose of this study is to identify all possible risks which are faced by the organization
in their regular course of business.

Research objective:

 To find potential risk of the organizations.

 To determine role of corporate risk management.
Problem statement:
As the fluency of the activities of the business are vital for the success of the business.
Management needs a department to tackle all of these issues for maintaining competitive
advantage over their competitors in business world. Corporate risk management is a
department which is responsible for identification and analyzing internal and external
risks and also provide the precautionary measures to mitigate their impact.

3. Literature review:
Economic conditions in global world are changing day by day. These frequent changes
exert pressure on corporates of the country to keep an eye on both intrinsic and extrinsic
factors to tackle future crisis. Klimczak (2005) argued that the goal of the corporate on
profit maximization, value maximization and stakeholder's benefit maximization. So,
there is a need of management to identify the potential risks and mitigate their impact and
help the corporate to attain corporate's goal. Rafael Schiozer (2006) defines corporate risk
management as the process in which risks are identified and they try to reduce their
effects. Merna and Al-Thani (2008) stated that the corporate risk management has the
responsibility to develop comprehensive strategies against the internal and external risks
of corporate. So that the business operations go smoothly.

Most important duty of risk management department in corporate is to identify risks and
its all types which can create hurdles in normal proceedings of the business (Doff, 2008).
The definition of risk as stated by Doff (2008) is financial loss due to changings in
competitive environment or the limit to which the corporate adapts to these changes.
According to Setyawan et al. (2018) and Veldman et al. (2013) the concept of risk is
extended as the list of risks in modern era is extended. Now, diseases, social unrest,
disaster and terrorism are part of corporate risks. Josie Myers (2022) said dangers and
liabilities faced by corporate is known as corporate risks.

Types of risks:

 Compliance risk

A type of risk in which corporate failed to comply with rule and regulation provided by
the authority. It may result in damage to reputation and loss of customer. Other damage is
in the form of penalty and restrictions.

 Human risk

This type of risk arises when employee of corporate failed to fulfilled their duties. They
failed to complete their tasks, involved in fraudulent activity, damaged the goodwill of
the company. End result of this risk is in down fall of company's productivity or profits.

 Strategic risk

When the executive's strategy of attaining goal is failed. Strategy failure might be due to
the poor assessment and planning of the executives. These failures damaged the
reputation of corporate and also resulted in huge financial losses.

 Legal risk

This type of risk arises when corporate failed to full fill requirement regarding rules and
regulations provided by law. It resulted in expensive lawsuits. They also damaged the
repute of the company. Company also faced financial loss. Legal risk included
contractual risk, disputes risk and regulatory risk.

 Operational risk

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This type of risk occurred when profits are decreased by day-to-day activity of the
business. Operational risk is resulted due to internal or external factors. It may include
eternal fraud, global crisis, employee error and damage of asset.

 Security risk

This risk arises when corporate not in a position to protect their intellectual and physical
properties. This is due to lack of technology, lack of trained employees, shortage of
proper resources.

 Reputational risk

As the reputation of the corporate is directly related to company success. So reputational

risk is burning topic for corporate. Sometimes direct and indirect actions of the company
created a bad image of the company, which resulted in significant decrease in profits and
also shattered the customer relation with corporate.

 Physical risk

In this risk the physical assets of the company are threaten and damage. This is due to
some accidental loss of asset, disaster and lack of employees' trainings. Repairs and
purchase of new assets resulted in company's financial loss.

 Financial risk

This type of risk resulted due to poor financial management of debt and liquidity.
Fluctuation in value of currency, unable to pay debt and shortage of liquid assets are main
causes of this risk.

 Competition risk

When the corporate not in a position to give some innovative in market, competitive risk
may be arisen. Their competitors have chance to grab the attention of customers with new
innovations. In the modern era innovative skills are game changer, that can create a huge
competitive advantage.

Process of risk management:

Fay Booker (2005) stated that the process of risk management is including identification,
analysis, evaluation and risk responses for effective risk management.

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Risk mitigation:
According to Mcmenemy (2019) the impact of risk can be mitigated with proper
planning. So, the need of corporate management is compulsory. Because it is the
responsibility of corporate management to identify and assess the potential risk of
corporate. Editorial team (2022) and Mukhtari et al. (2012) discussed some risk
mitigating strategies as follows:

 Assume and accept risk

This is the basic strategy used by corporate management to identify and assume all risk.
This is the first and crucial step that resulted in significant results.

 Avoidance of risk

Risk can be avoided when the corporate management identify and assess risk in time.
They also can plan some roadmap to avoid identified risk. For example, the financial risk
is avoided by give the employees training in advance. Trained employees can avoid many
upcoming hazards with the help of their training.

 Controlling risk

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The corporate management can control the upcoming risk with the help of rescheduling
about cost and performance. Its only happened when the assess the risk and having time
to control its occurrence.

 Transference of risk

Corporate management used these strategies to avoid future risks. To avoid financial risk,
they invest in different sectors for securing corporate finance. A strong financial planning
is also necessary for this step. Insurance is another important tool for mitigating the
impact of potential risks.

 Watch and monitor risk

Last but not least, strategy to mitigate the effect of business risk is watch and monitor
risk. Because the attentive team who keep an eye on each and every activity reduce
hundred time the impact of future damage.

Effectiveness of corporate risk management:

According to Smith(1998) there is no doubt in effectiveness of risk management
authority. Because they implement innovative strategies to tackle potential risks in
modern world (Boyer et al., 2004; Jaffari et al, 2011). The effectiveness of risk
management also depend on the resources they use to handle problems. Sometimes this is
expensive too(Diligent, 2019).

4. Research philosophy:
Research philosophy is a roadmap which is used to conduct any research. Researcher
used different research philosophies according to their research including positivism,
interpretivism, and realism research philosophy. We focus on interpretivism as we use it
in this study.

Interpretivism: a research philosophy type in which researchers moves from specific

observation towards generalized result. It is a subjective type qualitative research.

Pros and cons: interpretivism, a valuable study for academic basis. It is based on
observation taken through different resources. It is conducted for a specific of small
sample size. So, it is also cost effective. On the other hand, due to subjective nature there
is a room for biasness in the study.

Research approach:

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Researchers used two types of research approaches for conducting their researches.
Inductive approach deals with the study which move from specific to generalize the
results. In this approach new theories are formed for defining the human behavior.
Deductive approach deals with the study which moves from general to specific
reasoning. Already existing theories are proved in this type of research approach. In the
present study we use inductive research approach to evaluate risks of corporate and
potential strategies to tackle them.

Research strategy:
In this study we use grounded theory as a strategy for the research. This strategy is used
primarily for generating new theories. Qualitative data can be collected from primary as
well as secondary data.

5. Ethical aspect:
In research studies, interaction of people is compulsory. Researchers followed some basic
rules of ethics to conduct their studies. It included following ethical rules:

 Confidentiality: researcher must not publish any information of respondents

publicly. All the responses kept confidential.
 Anonymity: identity of participant must be concealed. Personal information
including contact number, home address are not required in any case.
 Informed consent: participant is free to take part in research. They should not be
pressurized by anyone. All the pros and cons related to the study briefly explained
to the respondent.
 Protection of respondents: researchers provide full protection to respondents.
 Fair play: research must not collect data through wrong doings.
6. Research design:
In research design, researchers explained the methods to collect data and briefly
described how he will manage the data. There are five known types of research design
including experimental research design: in which observe the relation of studied
variables under controlled circumstances, explanatory research design: in which
researcher wants to elaborate some key factors regarding some variables. correlational
research design: in this researcher define the relationship of variables over time.
descriptive research design: in which researchers describe the relationship between the
variables. diagnostic research design: the study in which researcher find the cause and
effect of some phenomenon.

As for this study we use descriptive research design to elaborate the role of corporate risk
management. Descriptive study is also known as hypothesis-based study. So, this study
enabled us to determine potential risk and role of risk management department,

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Data collection method:
Results of the research study is based on the data collected by the researchers. There are
two types of data collected by the researchers. Either it is through primary sources
(interviews, surveys and meetings) or secondary sources (published papers, books and
online blogs).

In current study we collected data from secondary resources, due to social restriction.

7. Analysis and recommendations:

Corporate risk management is burning topic for business all over the world. Researchers
want to determine the need of risk management department in the organization. Different
scholars gave the definition of corporate risk manage as the department analyze the future
risk and mitigate its impact (Klimczak, 2005; Schiozer, 2006; Doff, 2008)

In this study we investigate corporate risk and try to define them with the help of the
literature. As Doff (2008) , Marena &Al-Tahani (2008)and Setwan et al. (2018) define
corporate risk as the potential damage faced by the corporate. In this scenario editorial
team (2022) and Booker (2005) determine types of risk and also gave the process to
handle it.

All possible strategies adopted by the corporate management including identification and
assessment, avoidance, controlling, transference and watch and review of risk strategy
(Mukhtari et al., 2012; Mcmenemy, 2018; Editorial team, 2022)

Recommendations:

After complete analysis of literature, we recommend that the corporate management will
perform well when they are fully independent to take strict decisions. As the
responsibility for risk management is high so, they need some independence also. The
risk varies from industry to industry that’s why there is a need to conduct studies
accordingly.

8. Conclusion:
The need of risk management is crucial for every industry in todays' world. After the
covid pandemic, world economy is shattered completely. Shortage of food, global
warming, high inflation are the problems of every country. In Oman as a developing
country, need of effective risk management is a responsibility of all corporates. So, the
country economy will progress smoothly.

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In this research study we try to help the corporates for future risks identifications and its
mitigation. Role of corporate risk management is crucial for productivity and in smooth
running of corporate business. As corporate risk management can implement all possible
and appropriate strategy in organization.

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