Weekly Lecture

What is risk? According to Fadun (2013), “risk is commonly associated with uncertainty, as the event may or may not occur and is an essential part of business because firms cannot operate without taking risks” (p. 225). According to Laudicina (2005), risk is an inevitable component of doing business both domestically and globally. The most successful companies understand that growth requires risk because passive operations fail to capitalize on a company’s growth potential. Key to positive risk is “distinguishing between smart risks from dangerous gambles” (Laudicina, 2005, para. 2). The first step in understanding risk is being able to identify risk in the correct context. Risk identification is a tricky and complex process that requires an abstract look at the unquantifiable risks that could cause permanent damage to a company (Schwartz & Gibb, 1999). Once identified, the next step in the risk process is to mitigate that risk.

The process of mitigating risks and ethical decision-making is synonymous, as the procedures followed emulate one another. This process begins with a complete understanding of the facts (Baron, 2006). As the company understands the full environment and the options available to solve the issues, management must enumerate the reasons for the decision made (Baron, 2006). A critical approach to ethical decision-making and risk mitigation provides the decision maker with more than the relevant facts about the immediate issue (Baron, 2006). The basis for a historical review of past issues and decisions provides support for the immediate issue, as in most cases history tends to repeat itself. Although not meant to be a rubber stamp for future decisions, the consideration of past issues and situations helps provide the decision maker with valuable facts that were not previously considered.

Week 3 focuses on understanding how risk plays a role in contingency planning for potential disasters with one’s accounting information system. According to Arhail ALShbiel and Bani Ahmad (2013), the changing world of technology has had a direct effect on the way financial information is reported and on the accounting information system that delivers that financial information. One of the critical issues in regards to this changing technology is the potential “obstacles of communication between the internal control department and the computer department and its impact on the efficiency accounting information system” (Arhail ALShbiel & Bani Ahmad, 2013, p. 297). Arhail ALShbiel and Bani Ahmad (2013) found that four primary issues can increase the risk level of communication problems between those responsible for internal controls of an organization and those responsible the computer department of an organization. At stake is the efficiency of the organization’s accounting information system. As we learned in week 2, an effective accounting information system provides reliable data with effective accounting information that is in compliance with governmental regulations.

Please click on the link below to access a PDF version of the textbook PowerPoint Presentation for the weekly readings.

Chapter 6 PowerPoint Presentation (PDF)

Forbes School of Business Faculty

References

Arhal ALShbiel, M. O., & Bani Ahmad, A. A. (2013). The risks of communication between department of internal control & computer and its impact on the efficiency of the accounting information systems in the commercial banks. Interdisciplinary Journal of Contemporary Research in Business, 4(11),297-303.

Baron, D. P. (2006). Business and its environment (5th ed.).Upper Saddle River, NJ:Pearson Prentice Hall.

Fadun, O. S.(2013). Risk management and risk management failure: lessons for business enterprise. International Journal of Academic Research in Business and Social Sciences, 3(2), 225-239.

Laudicina, P. A. (2005). Managing global risk to seize competitive advantage. Ivey Business Journal Online. Retrieved from the ProQuest database.

Schwartz, P., & Gibb, B. (1999). When good companies do bad things. New York, NY: John S. Wiley & Sons.