Activity importance
The first step in the KRM method proposed in this paper is to differentiate amongst the
importance of the firm’s activities. This approach is grounded in the knowledge-based view
of the firm (KBV) (cited in Grant, 1996) where the value of knowledge is derived from its
combination with other resources to perform activities. Activities vary in their capacity to
create value for the firm (Barney, 2001) and, therefore, some are more important than others.
It is reasonable to accept that the risks associated with the most important activities, i.e.
those that create most value for the firm, are more significant then those associated with less
important activities. We call this concept ‘‘Risk Exposure’’, i.e. the level of risk associated
with the importance of the activity. The level of risk exposure was calculated in the following
way. Eighteen activities were identified from EngServ’s strategic plan and were verified by
senior management. Respondents were then asked to rate the importance of each activity
on a scale from 1 to 5, where 1
¼
not at all important and 5
¼
extremely important. Each
activity was then allocated an overall Risk Exposure score based on the mean score ranking
from respondents (see (a) in Figure 6)