Risk management (Centralized, Decentralized or Networked)

caution

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Short Description

Risk management is a process that is run by (or on behalf of) a specific party for the purpose of managing the risks that it owns. We distinguish between various kinds of risk-management:

  • centralized risk-management, which is a kind of risk management that assumes that the party that runs it has the power or right to give orders, make decisions that other parties must follow, and enforce obedience, which can be applied to mitigate its risks. This kind of risk-management ignores the natural autonomy of other parties.
  • decentralized or networked risk-management, which is a kind of risk management that assumes that the party that runs it acknowledges the autonomy of other parties to make their own (risk-related) decisions, and therefore starts and maintains relations with such parties that help them both to manage their individual, subjective risks.

Purpose

The purpose of a Centralized Risk Management Process is to manage the risks within its scope., thereby only taking the objectives, risks and interests of other parties into account if that helps to manage its own risks (or has other benefits).

The purpose of a Decentralized Risk Management Process is to manage risks within its scope as well as to contribute to the management of the risks of other parties.

Criterion

An Risk Management (process) is a set of related Activities that parties can run for the purpose of ensuring that the set of objectives they own come with risks that it finds acceptable. In other ords: the party ensures that the work that must be done in order to realize its objectives is such that the uncertainty that these objectives are not realized, is acceptable.

A Centralized Risk management (process) is a Risk Management process that only takes the interests parties other than the one that runs the process into account if that is a (net) benefit to that party.

A Decentralized Risk management (process) is a Risk Management process that aims to manage the risks of the party that runs it, as well as contribute to the management of risks of parties with which the party has a relationship.