"Risk" is the foundation and purpose for Risk Management Programs. Companies create risk the moment they are established and organized for business. Their very existence suggests that exposures to loss are manifest and if not managed or controlled, these risk exposures will result in loss. The loss may be financial, or loss of products or services, loss of customers and clients, loss of resources and to personnel and loss of public image. In many instances the risk of loss is minimal and will not impact the company to any great extent. In other instances, the risk of loss is significant and may result in severe repercussions, both short term and long term for the organization.
Take, for example, the recent Toyota safety recall that has adversely impacted that organization. The recall was the result of allegations of certain defects in their automobiles which may have resulted in accidents and, in some cases, death to drivers. The cost of this recall is enormous and its impact on Toyota's excellent image as a safe and reliable automobile may be even greater. There appears to be some evidence that Toyota knew about some of the defects before they became public knowledge and the decision was made to manage the problem without a recall. This was the "Risk" that the organization undertook merely by being in manufacturing. My point here is not to criticize Toyota for its dilemma, but to point out the consequences of risk and how harmful the consequences may be for the Company.
