Challenges in Applying Risk Management Concepts in Practice

Risk Management and Insurance Review, 2018, 21(2): 309-333

36 Pages Posted: 11 Dec 2017 Last revised: 23 Jan 2019

See all articles by Annette Hofmann

Annette Hofmann

St John's University - School of Risk Management

Nicos Scordis

School of Risk Management and Insurance, Tobin College of Business, St John's Unversity

Date Written: December 17, 2017

Abstract

The existing concepts of risk management face challenges when applied in practice. The perception of risk depends on the observer’s cognitive biases and world view which nuance risk related decisions. How an observer decides also depends on the metric used to quantify risk. While there is extensive literature on how people perceive risk, and on how to price risk in relation to the market, there is little on how to price risk according to how risks interact within the firm. The essay concludes with a suggestion (and includes relevant citations) for a way forward.

Keywords: risk, management, enterprise, strategy, biases

JEL Classification: G2, G20, L20

Suggested Citation

Hofmann, Annette and Scordis, Nicos, Challenges in Applying Risk Management Concepts in Practice (December 17, 2017). Risk Management and Insurance Review, 2018, 21(2): 309-333. Available at SSRN: https://ssrn.com/abstract=3083144 or http://dx.doi.org/10.2139/ssrn.3083144

Annette Hofmann

St John's University - School of Risk Management ( email )

8000 Utopia Parkway
Queens, NY 11439
United States

Nicos Scordis (Contact Author)

School of Risk Management and Insurance, Tobin College of Business, St John's Unversity ( email )

101 Astor Place
New York, NY 10003
United States

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