Question

Notes:

What are Robert Kaplan and Anette Mikes three categories of risk?
Internal and preventable. These risks come from within the organization and could include violations of ethics and failures in routine processes.
Strategy. This is desirable uncertainty that an organization willingly accepts when it commits to a strategy—for example, uncertainty whether loans can be repaid or employees will be fully productive.
External. These sources of uncertainty are outside the organization and beyond its control. They would include changes in the economy or laws and regulations, disruptive technologies, and availability of trained employees.

Answer 1

Kaplan and Mikes categorize risks into three types: internal and preventable, strategic, and external. These risks range from internal process failures to uncertainties inherent in strategy and uncontrollable external events. Controversies in risk categorization and the impact of imperfect information on financial and insurance sectors further complicate risk management.

Step-by-step explanation:

Robert Kaplan and Anette Mikes's Three Categories of Risk

Robert Kaplan and Anette Mikes have identified three categories of risk that organizations might face. The first category is internal and preventable risks, which are originated from within the organization. These can include ethical violations or failures in routine processes. The second category is strategic risks, which refer to the uncertainties an organization willingly accepts when committing to a particular strategy. Examples include the risk of loans not being repaid or uncertainties in employee productivity. The third category is external risks, which originate outside the organization and are beyond its control, such as economic changes, new laws and regulations, disruptive technologies, or the availability of trained employees.

Risks can be related to imperfect information, where there is an asymmetry between what insiders and outsiders of a company might know. This can influence how financial capital is raised and managed within firms. Additionally, the process of classifying people or entities into risk groups, such as in insurance markets, can be controversial and is impacted by issues of moral hazard and adverse selection, both of which are challenges arising due to imperfect information.