Page 42 - (DK) The Business Book

40

PUT ALL YOUR EGGS

IN ONE BASKET,

AND THEN WATCH

THAT BASKET

MANAGING RISK

ntrepreneurs are defined failure of new products, or damage
IN CONTEXT by their willingness to bear to the brand or a manager’s
E risk—particularly the risk of reputation. Whatever the level or
FOCUS
business failure. This is especially type, however, risk is something
Risk management
true for those starting new that all businesses need to be
KEY DATES companies, because more than half aware of and manage carefully.
1932 The American Risk of start-ups fail within the first five US businessman Andrew Carnegie
and Insurance Association years. Lesser risks in established was pondering these issues when
is established. businesses include the possible he suggested that in terms of
1963 Robert Mehr and Bob
Hedges publish Risk
Management in the Business
Enterprise, claiming that the Risk is an inevitable part But it can be quantified
objective of risk management of business. and action taken...
is to maximize a company’s
productive efficiency.

1970s Inflation and changes
to the international monetary
system (the ending of the
Bretton Woods agreement)
Part of this process involves
increase commercial risks. deciding what level of risk ...through oversight and
good management.
is “acceptable”...
1987 Merrill Lynch becomes
the first bank to open a
risk-management department.
2011 The US Financial Crisis
Inquiry Commission says that
the 2008 financial crisis was
...and where to place the Managing risk is a
caused partly by financial risk—on all the “eggs in the strategic process, balancing
companies “taking on too basket,” or just one? cost against reward.
much risk.”