What is Risk Management
Risk management is the process of identifying, assessing and controlling threats to an organisation’s assets and earnings whilst minimising liabilities that may arise out of a realisation of risk. These threats, or risks, could stem from a wide variety of sources, including financial uncertainty, legal liabilities, strategic management errors, accidents and natural disasters. IT security threats and data-related risks, and the risk management strategies to alleviate them, have become a top priority for digitised companies and should have processes for identifying and controlling threats to its digital assets, including proprietary corporate data, a customer’s personally identifiable information and intellectual property.
Benefits of Risk Management planning
By implementing a risk management plan and considering the various potential risks or events before they occur, an organisation can save money and protect their future. The ability to understand and control risk enables organisations to be more confident in their business decisions.
Other important benefits of risk management include:
- may create a safe and secure work environment for all staff and customers.
- can increase the stability of business operations while also potentially decreasing legal liability.
- may provide protection from events that are detrimental to both the company and its various stakeholders.
- should help protect staff and assets from potential harm.
- provides a framework for the organisation’s insurance needs. It may save unnecessary premiums.
Risk Management Strategies
Each industry has its own terminology but most risk management plans generally follow the same steps that combine to make up the overall risk management process:
- Establish context. Understand the circumstances in which risk is present and the criteria that will be used to evaluate risk should also be established and the structure of the analysis should be defined.
- Risk identification. The organisation identifies and defines potential risks that may negatively influence a specific process or project.
- Risk analysis. Once specific types of risk are identified, the organisation then determines the odds of them occurring, as well as their consequences. The goal of risk analysis is to further understand each specific instance of risk, and how it could influence projects and objectives.
- Risk assessment and evaluation. The risk is then further evaluated after determining the risk’s overall likelihood of occurrence combined with its overall consequence. The organisation can then make decisions on whether the risk is acceptable and whether the organisation is willing to take it on based on its risk appetite.
- Risk mitigation. During this step, organisations assess their highest-ranked risks and develop a plan to alleviate them using specific risk controls. These plans can include risk mitigation processes, risk prevention tactics and contingency plans in the event the risk eventuates. Risk mitigation may involve the taking out of insurance to cover downside risk.
- Risk monitoring. Part of the mitigation plan includes following up on both the risks and the overall plan to continuously monitor and track new and existing risks.
- Don’t put the plan on a shelf. Communicate and consult with internal and external stakeholders at each appropriate step of the risk management process and get buy in for the process as a whole. The overall risk management process should also be reviewed and updated regularly.
Questions to Ask
- What can go wrong? Consider both the workplace as a whole and individual processes.
- How will it affect the organisation? Consider the probability of the event and whether it will have a large or small impact.
- What can be done? What steps can be taken to prevent the loss? What can be done recover if a loss does occur?
- If something happens, how will the organisation pay for it?
- Is it insurable? If not you may need to either cease activity or have careful plans to mitigate any risks inherent in the activity
To discuss how we can develop risk management strategies that provide positive benefits to your organisation.