Managing diverse risks: An integrative framework

Risk is a crucial part of any business and managing risk is an essential function for management. This paper reviews current managerial practice and academic research in managing diverse risks. There are numerous elements of risk, some exogenous to the firm and others that are endogenous. In recent years exogenous elements of risk have increased both in number and complexity, and distinctions have blurred between national and international elements of risks because of the integration across borders of markets, institutions, and political and operational risks. An explicit classification of risks as exogenous and endogenous will focus managerial attention to the changing exogenous elements, to the often ignored endogenous elements, and to the needed integration of managing exogenous and endogenous risks. While there is an increasing body of research examining risk, there is a need to examine exogenous risk elements as systems of risk rather than as independent elements and integrate endogenous elements including behavioral and incentive-related aspects with the systems of exogenous risks. Additionally, international case studies and surveys about risk perceptions and attitudes of managers across different organizations and within levels of organizations will improve our understanding of the diverse risks faced by multi-national corporations.