The Importance of Identifying and Measuring Risk
Famed management guru Peter Drucker famously stated that “what gets measured gets managed.” The corollary is also likely true; what doesn’t get measured, doesn’t get managed. Identifying and measuring risk is critically important for a variety reasons; reasons that extend beyond Drucker’s assertion. Intelligently identifying and carefully measuring risk are the central elements of successful ERM.
The first reason for having a complete identification of risk is what we call the first law of risk management: the mere fact that you acknowledge that a risk exists automatically increases the probability and magnitude of it occurring if it is a good risk, or automatically decreases ...
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