Author(s)

C. Dumitriu

Abstract

In the volatile environment in which we are living, new risks can emerge faster than our ability to manage them. The purpose of this paper is to present a framework for identifying the total risk of a company. Our model is based upon specific criteria organized in a data collection instrument (DCI) that researchers and managers could use to gather information on potential risks, and to select relevant risks for building the enterprise risk-profile. This paper presents the structure of our DCI, including a descriptive analysis of all incorporated risk categories, followed by the global, cross-sector and inter-sector results from our DCI verification, using the risks disclosed by Fortune 500 companies (2004). Keywords: risk categories, risk identification, risk disclosure, company risk profile, Fortune 500 companies. 1 Introduction The scientific community is rather divided in its approach towards risk management. Advocates of the market risk model focus exclusively on analysing the systematic risk, assuming that investors can eliminate specific risk through a diversified portfolio. Advocates of the strategic risk model adopt a different view, that of company managers, and thus focus instead on the total risk of the enterprise. In one of our previous researches, we adopted the market risk model, assuming that a portfolio’s return depends solely of the ex-ante measure of its beta. We investigated the ex post risk-return relationship for the Fortune 500 companies for the period 2000 to 2003. Almost all of these high performing

Keywords

risk categories, risk identification, risk disclosure, company risk profile, Fortune 500 companies.