It’s a management tool used to identify the potential risks associated in a business process in advance, assessing them and taking preventive measures to minimize or eradicate the risk.
These can be financial uncertainty, accidents, legal liabilities and natural disaster, data related & security threats.
Every organisation has the risk of inherent and unexpected events that can result in losses or may lead to permanently close the business if not handled properly. By implementing the risk management plans which helps in establishing the procedures to avoid potential risks and minimizes their impact on the organization.
Benefits of Risk Management
A safe & secured environment is created
Protects human lives & assets from potential risks
More stabilized business processes
Safeguards Company & environment
Risk Management Strategies
Establish context: A criteria should be established to evaluate the risk and framework of analysis is to be defined
Risk Identification: Potential risks that can influence any project or process in a company in a negative direction are identified & defined.
Risk Analysis: After identifying the risks a clear analysis is done to understand the risk in detail and its influence on the goals of the organisation.
Risk Evaluation: The analysed risks are evaluated based on the likelihood of occurrences and other aspects based on which the organisation decides on the level of risk acceptance.
Risk Mitigation: Based on the severity of the risks a plan is developed which includes risk mitigation, risk prevention & contingency plans.
Risk Monitoring: Continuously monitor and track new and existing risks & update.
Communication: All the shareholders should be included at all levels of risk management.
Risk Management Approaches:
Risk Avoidance: Wherever possible avoid the costly risks & consequences of a risk event.
Risk Reduction: By reducing the scope of projects or processes we can reduce the amount of risk we can take.
Risk Sharing: Risks sometimes can be shared internally or externally like to a business partner or a vendor.
Risk Retaining: It is worth retaining some risks where in the associated profits are higher than the risks.