Global risk management

To manage and act is to take risks. If risks didn't exist, there would be no success or failure. There would be no action, and the objectives of organizations, public or private, would not be achieved! In fact, risk and opportunity are identical. The same Chinese symbol means risk and opportunity. The former is feared, the latter sought, but these are just two categories of the inevitable consequences of an uncertain future.

Taking action doesn't mean taking just any risk. It means consciously taking measured, controlled risks. Managing risks means knowing how to identify them, quantify them, reduce them economically, and then finance their residual severity.

Every organization (company, community, association) has objectives and obligations. The former are set and expected by shareholders, customers and members. The latter are set by society, and are expressed through the expression of citizens' needs, the law and the criminal liability that flows from the latter.

Global Risk Management (GRM) provides a comprehensive and coherent response to these two concerns, because managing risks means knowing how to identify, quantify and control events likely to have a negative impact on these two categories of issues.

All organizational functions are sources of risk. These risks affect all or part of the organization's human, material or financial resources. They arise from the random nature of the internal and external factors that govern the life of the organization.

GGR is therefore defined as a cross-functional approach based on the systematic investigation of the variance of these factors. In this way, a stochastic management method is born, which refuses to consider only the average value of decision-making factors, but tries to consider the possible variations of these factors, in terms of intensity and probability.

A simple example illustrates this somewhat theoretical definition: the success of an industrial investment depends on many factors:

• research and development costs ;

• TEST RESULTS ;

• potential market ;

• product cost price ;

• industrial plant availability ;

• competition ;

• fluctuating economic indicators ;

• regulations, etc.

Each of these factors is a random quantity defined by its mean and variance. Reasoning only in terms of averages is a mathematical heresy and a management error: with your head in the fridge and your feet in the oven, on average...