Assessment 1 –The aim of this assessment is to understand why organisations undertakes risk management activities, and how organisations should identify and assess the significant risks that it faces....

COMPARING THE RISK MANAGEMENT THEORIES AND TECHNIQUES AND IDENTIFYING PARTICULAR SOURCES OF RISK OR PARTICULAR ELEMENTS IN THE RISK MANAGEMENT PROCESS
Table of Contents
Introduction    3
Theories in Risk Management    3
The Financial Theory    3
The Agency Theory    4
Techniques in Risk Management    5
Avoidance    5
Reduction    5
Sources of Risk    6
Production Risk    6
Marketing Risk    6
Human Resources Risks    6
Conclusion    6
Bibliography    8
Introduction
The assignment aims to understand why various organisations undertake risk management theories. An organisation contains multiple kinds of risks. The management needs to formulate specific strategies and approaches to mitigate the effects of the risk on the workforce of the organisation. Through this assignment, various risk management theories and risk management techniques would be discussed. It would be shown the ways, in which these theories and practices apply to the organisations at different points of time in order to mitigate the possible threats. The assignment would also aim to identify the sources and the elements of risks as well. The assessment would help the organisations in identifying and assessing the significant risks that might be faced by the organisations.
Theories in Risk Management
The Financial Theory
As the name suggests, this theory on the pertinent risks that are available to the organisation based on finance. This theory stresses that the management of any organisation must be attentive enough towards the dangers with the help of strong finance. It is the strength of the finance, which would help the organisations in coming out of the pertinent risks. This theory has been most prolific in terms of both theoretical model extensions and empirical research. This theory states that a flawed financial structure in the organisation is the ultimate cause of the risks[footnoteRef:1]. This theory states that the lower volatility of cash flow is the result of the lower volatility of the firm value. [1: Mihalis Giannakis and Thanos Papadopoulos. "Supply chain sustainability: A risk management approach." International Journal of Production Economics 171 (2016): 455-470.]
The flawed financial structure might give rise to an increase in debt, employee dissatisfaction, customer satisfaction and cause of bankruptcy. Therefore, to avoid these consequences, the organisation needs to straighten its financial value. The finance or the abundant availability of costs is the most effective way in risk management. With the availability of ample finance, the organisation would be able to cover up the risks of the debts, bankruptcy and customer satisfaction[footnoteRef:2]. [2: Lu-Xing Yang, Pengdeng Li, Xiaofan Yang, and YuanYan Tang. "A risk management approach to defending against the advanced persistent threat." IEEE Transactions on Dependable and Secure Computing (2018)]
The theory aims to build a robust economic system for the company to carry out the risk management system in the most effective way. This theory is better than other approaches since it tries to build substantial financial grounds for the firm. This theory places an initial stage of risk management for the organisations.
The Agency Theory
The agency theory stresses on the separation of the control in the process of risk management. This theory states that a single management system must not hold power or decision making control. Instead, there must be separation...