I’m working on a business question and need an explanation and answer to help me learn.
Today my discussion about the FIRM and PESTLE models of Risk Classification Systems. I have already done that, but I would be grateful if you could reply to my post’s comments.
Here is the discussion question:
The importance of classifying risk relates to the duration of its impact on business continuity: short, medium, or long. Review the FIRM and PESTLE models of Risk Classification Systems in Chapter 11. How do you see each one contributing to organizational Risk Management?
Here is my post:
Risk classification is crucial for effective risk management in organizations. If an organization wishes to manage specific risks, it should be knowledgeable about the type of risk in place. The FIRM and PESTLE models of risk classification are significant in the management of risk. This risk classification model is a form of analysis that is essential for dealing with internal risks. The model entails the use of a firm risk scorecard that is built on various aspects of risk classification, including nature of the impact, time-scale of impact, overall risk exposure, hazardous nature, control or opportunity, and also the risk capacity and overall exposure of the organization (Hopkin, 2017).
The FIRM model of risk classification provides a way for an organization to classify a risk based on its nature, which is suitable for managing internal risks in the organization. Therefore, it becomes easy to control internal risks in the organization if the attributes of internal risks are well illustrated.
PESTLE is the most relevant risk classification model for analyzing external risks. The external risk refers to the external context that is not wholly within the organization’s control. Still, actions can be taken to mitigate risks associated with those external factors. The PESTLE model enhances risk management in an organization by facilitating understanding of the wider business environment, the anticipation of future business threats, encouragement of the development of strategy and external thinking, and helps identify the actions to avoid or avoid reduced impact threats. The PESTLE model, therefore, promotes the organization’s risk management.
Hopkin, P. (2017). Fundamentals of risk management: Understanding, evaluating, and implementing effective risk management. London, NY, NY: Kogan Page.
The first comment that I need a reply to it:
Your discussion offers insight into the complexity of organizational risk management. Managing risk from internal versus external threats may require different skill sets. How do you think an organization can differentiate and respond to current versus future risks?
The second comment:
When thinking of both the FIRM and PESTLE models, do you think they always go hand in hand or can they operate separately on their own/without the other? I think that the must coexist. While risks can never be entirely eliminated, being aware of the risks and where they come from can help better manage their effect and steer a business to success. Being able to demonstrate the context of the organization helps a business to properly align its risk management strategy with its overall risk tolerance.
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