Dr Michelle Tuveson is Executive Director and a co-founder at the Cambridge Centre for Risk Studies at the University of Cambridge Judge Business School. Michelle’s research addresses corporate risk profiling and strategies for making organizations more resilient. Michelle has recently contributed to our Risk Agenda 2025 project as one of our experts.
Realizing Greater Competitive Advantages from Risk Management in a Corporation: Marrying the Upside and Downsides of Risk
It is a truth universally acknowledged that a corporation in possession of a good fortune is fraught with risks. The risks might be internally focussed such as those related to talent and culture or be driven by external exogenous events, ranging from regime changes in regulation to cyber-security attacks. Since corporations are in the business of creating value for their shareholders, we assume that their business processes include effectively embracing and managing their risks. It follows that a firm’s competitive advantage should lead to maximizing stakeholder value. In the next 25 years, business and wider society will place increasing value in the ability to view and quantify the true state of a corporation’s collective risks at any moment in time, and have insights into corresponding hedging strategies.
Some may question why the risk management field should focus on further empowering corporations when some scholars argue that during the last several decades, corporations have expanded in dominance, as measured by their contribution to economic output, ownership of intellectual property, and political, educational and cultural influences on society. As a trade-off for the creation of jobs and livelihoods in communities, the world seems to have accepted a societal evolution towards what Keynes referred to as economic statesmanship. Many corporations have been empowered to be on equal footing with the state and certain corporate controls have passed beyond the confines of private enterprise and into society more broadly.