Risk Management and Corporate Innovation : A Reflective Journal
Risk Management forms an integral part in assessing the amount of leverage held by an organization. It is equally imperative to integrate the notion of innovation in terms of Risk Management since it encourages the potential business venture to avail the tasks of higher merit. On that note, it turns out to be essential to explore the interdependence that underlies among these dominant variables that shape a business venture.
As per the comprehensive suggestion of an anonymous evolutionary biologist, Risk is an indispensable component of human life and an inherent proclivity towards risk-taking is one of the rudimentary characteristic features of a human being. Since human beings are self-evolving and inquisitive species driven by an reasonable objective purpose and as all purposes of merit pertains a substantial moiety of risk in terms of uncertainty and probability, Risk can be considered as an omnipresent entity. This paper intends to explore the underlying relationship among Risk and Innovation applying a reflective approach in order to consolidate the concept of risks and how it facilitates the simulation and execution of innovative aptitude. At a glance, the notion of risk appear hazardous as it is probabilistic and can cause catastrophic consequences, though, if we can delve deep into some stimulating discussions, the notion of risk inherit a vast theoretical and practical argumentative support in order to present it as an situation-specific entity and a potential vector of innovative possibilities.
Illustrations of the Variables
Management of Risk
The moot essence of Risk is shaped by the postulates of decision theory where it is dominantly addressed in terms of diversity coupled with the possibilities of both suitable and adverse outcomes. Thus, risk-taking is typically described as the faculty to opting among alternative strategies while being pedantically aware the potential outcomes in probabilistically uncertain circumstances. There exists a flagrant trend where the managers and other acting players of a respective business concern always tend to associate the notion of risk with hazardous and catastrophic outcomes without the notice that they are digressing the foundational notion of decision theory. This evokes an immense possibility to deliberately ignore the impacts of excellence since they are less probabilistic and not under the consideration of any primitive approximations (McNeil, Frey & Embrechts, 2015). On the contrary, some of the organizations (Most of the Air Traffic Control Units and Nuclear Power Plants in Sweden) develop an precocious yet early proclivity to identify potential risks and embrace it is as an significant variable of improvisation and innovation. It is very typical a trait within the current business scenario to overestimate risk factors without being potentially aware about their likelihood and avail the outcomes with specific and expected risks (Marcelino-Sádaba, Pérez-Ezcurdia, Lazcano & Villanueva, 2014).
As conveyed by the Prospect Theory, the level of aspirations, which is the potential driver of the perceptions that usually distinguishes the threats from opportunities, can be characterized as status quo and predominantly molded by two determinants such as Critical Performance Targets and Survival. The level of aspiration is a paramount component in the discourse of risk management since it significantly influences the risk propensities that further guides the impulse of focus of whether to avail the specific outcomes with expected goals or to rely on the introspective estimates of probability. Practically, the governing features of Critical performance are constraints in terms of budget or break-even and if a concern is entirely driven by the preordained performance objectives will do critically well but cannot acquire the confident and preparation to attend higher excellence. On the other hand, if the respective performance is not up to the mark and the strategic executive still appear focused with the limited yet fecund opportunities it means they have prepared themselves to embrace risks as a tool to facilitate the process of innovation. On the contrary, if the aspiration level swings due to the consistency of poor performance, there is a potential possibility for the strategic executive to become risk-averse since the performance factor imparts a gross jeopardy in the notion sustainability and survival. Some of the scholars have argued over the fact thatconsistent poor performance might also increase the risk-aversion of an strategic executive who is operating under the command of ‘Threat Rigidity’(Johnston & Marshall, 2016). . As the consistency of poor performance can evoke dilemma in the strategic policy maker and refrain them from availing objectives of higher excellence, the notion of Threat Rigidity can also be posed as a potential hindrance on the way of strategic excellence since it pertains the capability to restrict the envisioning of meritorious alternatives and allow the executive to induce complacence and rigidity about the prevalent success (Hayne & Free, 2014).
In a generalized sense, the respective managers of several business units loves to consider themselves as prudent policy makers and can manipulate the respective risk aversions. Managers appear to approve risks after being assured about the high command over the circumstantial uncertain outcomes. This belief also grossly consolidates the conventional notion of Decision Theory where risk has been evaluated in the circumstances of expected uncertainties rather than a systematic social action. Thus, the managers tend to avail those sort of risks that enables them with the expectation of renegotiation. This inclination of the managers allows the respective concern to employ a diverse range of tactics such as risk sharing or delegation of strategies. Apart from everything else, as accepting risk is an indispensable and desirable business trait, managers wish to appoint them on the reinterpretation of the signifying events in order to inflate their perception regarding riskiness and meritorious objectives.
The interdependence of Risk and Innovation
Most of the pertinent studies in this discipline have conceptualized the notion of innovation as a new asset in the business premises. According to the translation of (Bromiley, McShane, M.,Nair & Rustambekov, (2015), Innovation is a domestic demand that any business unit feel urge for or a potential hindrance in the way of sustainable performance. From an economic perspective the notion of innovation can be illustrated as a homogeneous blend of resources that possess the potential to affect the emerging commercialization. Thus, innovative product can be characterized as a development in technological expertise that inherently pertains a commercial opportunity and which vehemently addresses the requirement for an innovative unit to be effectively in collaboration with the foreign market and ensures the addition of the generated increment in the consumer market (Flemig, Osborne & Kinder, 2016).
An objective to develop an innovative business is potentially intricate since the shining of such a venture is stringently dependant on the potential consumers. It appears imperative for the core targets to prepare themselves as dominant recipients of innovation. To be elaborative, the core customers need to be acquainted with the prevalent culture of innovation that intends to reflect the distinctive features and altogether assists the respective enterprise to accomplish their desired objectives. Furthermore, it is imperative to address that there lies a considerable dimension of challenge while availing the innovative projects of higher excellence and the respect concern must contain the capability to embrace the underlying uncertainty associated with it (Groves, Kayyali, Knott & Kuiken, 2016).
On the advent of the previous discussion regarding innovation, it is very evident the notion of uncertainty is inherently embedded within the ambience. This conceptualization will further facilitate the enquiry regarding risk since it mainly intends to address the deficiency of relevant information. This consolidates the fact that risk is an exclusive phenomenon in the ambience of risk management and the innovative enterprises must acquire the confidence to accept this fact. The subsequent analysis of such threats can be transmitted as the consequent activities that chiefly focus to assist the respective concern to anticipate the potential risks and to work on the strategies to deal with those (Pérez‐González & Yun, 2013). This requires a prudent understanding about the prevailing market in order to guide the respective actions towards the contribution that considerably facilitates their bottom-line criteria. Furthermore, it encourages the respective concern to deal with the identified risks systematically in order to retain the prevailing sustainability in this volatile market ambience. Moreover, it ensures a suitable environment to facilitate the process of reconciliation with the high proportion of probabilistic uncertainty. The flexible and mobile ambience of the market endows the potential players of the business concern with the capability to deal with the potential risks effectively.
The practices oriented to risk management enable the respective unit with some prudent and comprehensive aptitude to deal with the discerned risks. Furthermore, it encourages the intellectual vision to categorize it as an effective form of relief. This sometimes appears beneficial since the detection of the potential risks is imperative to fix the project scheduled and ensure the proper allocation of time and resources. This further guides the decision-making faculties while taking the requisite steps in order to develop the capability to face with the immediate circumstances that cannot be ignored. Moreover, the identification of potential risks can be posed as a prudent analytical framework to evaluate the feasibility of the underlying project. As an outcome, this provides an individual analysis of the associated risks and ensures the proper exposure of the generic panorama of the exclusive products that are innovative. In this regard, it is imperative to declare that the underlying market suffers from a gross deficiency of prudent marketing models and that is why the notion of innovation is unable to acquire that level of coverage.
In order to analyze the underlying factors of Risk Management and explore the interdependence of it with the notion of innovation can seem encouraging while assessing the cumulative market impacts. Furthermore, the significance of considering time management as a governing player is potentially essential since it encourages the launch of prudent and systematic analytical models that this market is grossly lacking. Enterprise Risk Management (ERM) is one such tool that earns prominence as an essential tool to integrate risk management with innovative ideas in order to discern the risk propensity of the respective business concern. ERM can be defined as a systematic analytical framework that enables the respective concern to expose the potential risk to have a broader view of the risks in an ordered manner (Wu, Chen & Olson, 2014). This analytical tool is capable to address risks of any proportion, whether it is of corporate level or in local expertise. In order to accomplish the declared facilities proposed by the analytical framework, a pertinent foundation of literature is one of the paramount requisites. This tool is extensively treated as a global index due to its compatibility with any kind of risks. Moreover, the model enables the respective enterprise to cross check the entire outcome as per the requirements. Apart from that, it takes both of the qualitative and quantitative measure into account and evaluates the immediate impacts in the prevailing market.
In accordance with the several pertaining literature, the ability to accept and mitigate risks in a general sense is a dignified trait that every human being pertains in a distinct proportion. Moreover, the ability of risk-acceptance can be posed as a reliable measure of the respective business unit to identify their inclination towards embracing innovation. Innovation always comes with a dimension of exclusive and substantial risk and this considered as a vector in this volatile business paradigm.
Constraints and Control
In a general sense, Innovation can be seen as a potential tool to acquire profit in this volatile market. On that note, budget and other associated financial estimates can be cited as a potential constraint that holds the potential to restrict the business executives from availing the innovative objectives. Moreover, as the innovative ideas inherit a potential requirement of embracing risk in terms of addressing the alternate target customers. On the contrary, the innovative ideas urge for accepting potential risks associated with the business venture and the impulse for the further leap needs to be controlled in order to devise a suitable plan for formulating an approach that takes care of the risk factors. In addition, it should also take into consideration the level of innovation that a company thrives to achieve viewing the past profit making principles that the company has been adopting. This involves adopting new and improved policies for minimizing risks and betterment of financial paradigm thereby reducing chances of risk factors to hamper its future prospects. As far as constraints are concerned, company secretaries aim to devise new and improved technologies to overcome problems that management encounters. After all it is the final verdict of the management that counts.
Simulations and Reflections
The prevalent simulations regarding risk management and the integral nexus with innovative aptitude helps this researcher to acquire a in-depth understanding of ownself and shaped the current communicational skills that I have been able to acquire. Moreover, it has been able to convince me that in order to attend tasks of higher excellence one needs to emphasize on the segment of individual learning. The requisite competency in order to avail innovative ventures cam be cited as the corporate analogue of availing tasks of higher competence. The acquired competency can be characterized as the simultaneous improvement of the individual self through learning. It is imperative for any subordinate to acquire higher level of individual aptitude in order to procure the requisite capability to grow as an competent worker. Moreover, as the meritorious task are inherently intricate to attend and equally important to overcome since it is attached with the some decisive business aspects. Risks, on that note, can only be accomplished by being prepared with the idea of innovation that owns the potential to drive the entire venture.
Moreover, the process of individual learning constitutes and emphasizes the aptitude of communication since assigned tasks of higher intelligence essentially requires the collaborative involvement into intercultural encounters. The potential incapability to overcome the internal barriers of communication will inherently nullify the subordinate from availing the assigned task of higher excellence. In the current course, I wish to reflect the fact that this analytical evaluation of the integral components of any business venture holds the potential to address that the individual learning is a seminal criterion for any discourse of business. Furthermore, it is equally important for any individual worker to acquire a desired level of intelligence in order to develop the requisite competence to avail tasks of higher merit and eventually consolidating the respective business identity.
In the corresponding business journal, the researcher wishes to explore the collaborative nexus that underlies within the notion of Risk Management and availing business ventures of innovative possibilities. In this course of reflective journal, a descriptive and analytical tone is attempted to retain in order to address the expected and miraculous outcome of the effective nexus of the two dominant variables. Moreover, it has been also addressed with suitable argument that the risk propensity of any business concern is an essential tool to exploit in order to avail tasks of higher excellence and eventually attain a relative competitive edge.