The Role of Risk in Business Decision-Making

Risks can impact an organization in the short, medium and long term. These risks are related to operations, tactics and strategy. Operations are the routine activities of the organization. Tactics define how an organization intends to achieve change. Therefore, tactical risks are typically associated with projects, mergers, acquisitions and product developments. Strategy sets out the long-term aims of the organization, and the strategic planning horizon will typically be 3, 5 or more years. Consequently, managers must prepare to embrace it effectively. Risk management includes strategies and techniques for recognizing and confronting these threats. Understanding of all risks allows an organization to measure and prioritize them and take the appropriate actions to reduce losses.