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FIRM Model Health and Medical Discussion Essay
post one SS
The FIRM model provides a structure for risk identification. It also allows an organization to determine the person responsible for strategic risk management. Chapter 11 further emphasizes that appropriate risk classification enables organizations to identify risk appetite, capacity, and exposure (Hopkin, 2017). The FIRM model classifies risks into financial, infrastructural, reputational, and marketplace categories. Also, it identifies dependencies for each category, making it easier for an organization to identify and assign a scorecard to the risks it faces. This model focuses on the things an organization can control. An organization can control the financial risks it faces by, for instance, setting up internal control systems to prevent fraud.
The PESTLE model is also essential in organizational risk management because it provides a holistic view of the business environment. It prompts an organization to examine political, economic, social, technological, legal, and ethical risks (Hopkin, 2017). While the FIRM model focuses on internal risks, the PESTLE model is more external-looking. It helps risk managers to assess how elements not within the organization’s control can affect it. It is a simple risk classification approach that facilitates the understanding of the entire business context. Organizations can use the PESTLE model to understand the external business environment and make internal adjustments and preparations in light of risks emanating outside their control.
Hopkin, P. (2017). Fundamentals of risk management: Understanding, evaluating and implementing effective risk management (4th ed.). Kogan Page Publishers.
post 2 AM
In the organizational environment, risks could be categorized on the length of their effect as short, medium, and long-term risks. Even though this approach does not count as a formal approach to classify risks, it will help in further understanding the proposed risks and placed them in the proper category (Hopkin,2017). Due to the nature of some risks, this categorization of risks is not always going to report a given risk in one category because some risks could have a short and medium impact at the same time (Hopkin,2017).
Typically, short-term risks affect the organization immediately after it occurs, while medium-term risks impact will not appear before months or a year after it arises. On the other hand, long-term risks consequences may take from a year to five years – sometimes longer- appear on the organization (Hopkin,2017). With that in mind, organizations frequently utilize risk identification models like the FIRM and the PESTLE models to identify all possible risks and determine the best approach to treat or mitigate them. Like any other risk approach, one model would serve better than the other depending on the nature of risks being addressed by a given organization.
The FIRM model represents Financial, Infrastructure, Reputational, and Marketplace risks. The model defined and categorized the risks based on their effect (Hopkin,2017). Furthermore, the model divided the risks into two categories internal risks, the financial and the infrastructure risks, and external risks, which are the marketplace and the reputational risks. From my perspective, this model could be used as a general model to categorize risks and their impacts in the long run. It can be used as a part of the organization’s vision for the future, but I cannot imagine using this model during regular daily operations. For instance, one organization could predict the market changing, and it is impacts on its operations for the next five years. Then, they address the possible risks under the FIRM model, which will serve as a risk vision for the organization.
In contrast, the PESTLE risk model could be used on a daily basis. The abbreviation PESTLE refers to Political, Economic, Sociological, Technical, Legal, and Ethical/Environmental risks. This model will provide its best results when combined with the SWOT analysis (Hopkin, 2017). SWOT analysis is a risk analysis based on the strengths, weaknesses, opportunities, and threats that a given organization may face. From my point of view, this model provides a straightforward and effective way to anticipate the evolving external risks within the organization structure. I agree with Hopkin 2017; this model will serve it best in the public sector. Unlike the private industry, the public sector organizations usually deal with all proposed risks in the model, making it more suitable for them.
Hopkin, P. (2017). Fundamentals of risk management: Understanding, evaluating and implementing effective risk management. London, NY, NY: Kogan Page.
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FIRM Model Health and Medical Discussion Essay
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