Risk Assessment - Essay Example

In most organizations or companies, risk assessment plays a pivotal role in decision-making procedures. To carry out this task, leaders must know certain benchmarks and procedures in order to have a full grasp of the magnitude of risks that organizations might face. Van Maurick (2001) presupposes that both the convergence and divergence of contemporary and classical leadership theories provide guiding principles on how to quantitatively and qualitatively predict them. This is arguably a seemingly watertight estimation, for it enables managers at all levels to have a panoramic view of what actions to take depending on the challenges at hand.

The question is: How can these concepts be squarely applied in risk assessment? Hiring qualified people, just like Machiavelli opined, is among the practical skills generally associated with good leadership. As corroborated by Grint (1997), an effective leader invariably chooses competent associates and subordinates who can give straightforward and well-thought-out recommendations in response to specific problems to carry out any undertaking regardless of their interests. This is where the significance of “risk managers” is realized and appreciated.

Evidently, leadership and risk assessment have an overt interplay that produces desirable results especially when applied in cases wherein business forecasting is crucial to a company’s success. As a result, the essence of risk assessment in the overall success of an organization is not only valued but also highlighted. According to Slywotzky, A. and Drzik, J. (1995), effective leaders imbued with knowledge in risk management are needed so that failure can be foreseen, avoided, or addressed.  As pointed out by leadership theorists, not all individuals can become ideal or effective leaders. As such, certain traits have been identified to find out who can carry out specific tasks in relation to risk assessment and risk management as a whole (Slywotzky, A. and Drzik, J. 1995).

This takes us further to closely examine and incorporate the precursors of the existing ideas governing leadership to understand how organizational frameworks operate when such theories are applied to risk assessment in juxtaposition with its thrust which is broadly subdivided into four major categories, namely:

1. Identification of assets and their values
2. Detection of vulnerabilities and threats
3. Quantification of the probability and business impact of potential threats
4. Providing an economic balance between the impact of the threat and the cost of the countermeasure

Given these goals, the different paradigms or theories like trait, behavioral, contingency, and transformational theories need to be thoroughly understood so as to draw plausible ideas that can be used in recent times. Seen from the point of view of a risk manager, Hersey (1984) pointed out very succinctly that “conflict” gave birth to leadership. As such, leaders are presumed to take the role of addressing the conflicts at hand.  This was further supported by Senge, (1990) by espousing that the convergence of leadership theories paved the way for the scientific forecasting of possible risks in almost any form of empirical undertaking. The process of identifying vulnerabilities and threats, and assessing the possible damage to determine where and when to implement security safeguards are the very core of why different schools of thought surfaced. Isolating each of them can give risk managers a wider horizon on what steps to take. Using the contingency approach, good leaders can determine what style of management to use by first determining what type of situation they confront. Then, they select one of three styles of leadership—task-oriented, relations-oriented, or a combination of both (Heifetz, 1994).

Risk analysis, as an indispensable arm of organizational management, is used to guarantee that the course of action to be taken is cost-effective, appropriate, timely, and responsive to threats (Steen, 2007). Both classical and contemporary theories on leadership tackle the overt and covert behaviors of humans needed to assess presumed or existing threats. The rationale of contingency theory can be seen as parallel to what risk managers are actually following when executing certain procedures in identifying risks.

Most, if not all of the classical leadership theories, are still relevant and can be employed in the conduct of risk assessment (Burns, J. M. 1978). For example, transformational theory espouses that rallying the people within the organization toward the successful completion of tasks makes it possible for people to work as a group and not as individuals. This is a clear departure from the previous theories, like trait or behavioral theory which focused on what an individual could do towards the realization of the organization’s goal (Gardner, 1989). As explicated by Gardner, there are many facets that individuals should possess in order to be effective in their job. These existing "recognized" leadership theories give us a clear idea of how individuals can contribute to the overall success of a company.

Beyond this, there are still many "unofficial" schools of thought that purport to shed light on what leadership is and what leaders should be and must have. However, it is important to note that what classical theories have in common is their focal point which mainly and exclusively gravitates to assigned leadership or legitimized position power (Doyle and Smith, 2001). Risk managers, as members of middle management or as outsourced components of a company, need to understand the dynamics of leadership and management and their people by taking into consideration what contemporary and classical leadership theories have to offer so that they can be properly guided in their course of action.