Key Elements of Risk Management

For sustained development in any organisation, it is vital to have an effective risk management process. While risk is an inevitable consequence of doing business, it can be measured…and certainly, it can definitely be managed.

ESSENTIAL TOOLS

 The only way you can succeed in risk management is by making sure that you have all the essential elements needed to solve different issues. Besides having reliable elements, you also need a dedicated team that can assist you with the risk management process. Other things needed for risk management are procedures, codified policies and a business culture that encourages risk ownership. Furthermore, it is vital that the entire organisation works together as a team so that it can be easy to succeed with risk management. Also, make sure that each sector has the tools and the training required to manage the department’s risks. Therefore, make sure that the management provides guidelines, training, tools and resources. There are many tools that you can use to manage risks; all you have to do is find the ones that are essential for your business.

RISK MANAGEMENT THEORY

 Crossing the road is risky. Risk is minimised by not avoiding it, but by setting up control measures borne from knowledge and experience by those managing the organisation to which there is risk that threatens an outcome that is being pursued. Moreover, you also need to understand that risk management can only be achieved if you have a plan.

 Below are the steps you should consider.

 1. IDENTIFY opportunities as well as threats that the organisation faces.

 2. PRIORITISE threats according to odds, speed of starting or occurrence, and the size of the affected areas.

 3. RESPOND by researching ambiguous risks,shifting risks using contract provisions, insurance, joint venture and even contract provisions.

 4. IMPROVE and ASSESS how it would be best to manage each risk in the future. You can do this by analyzing how you dealt with the current problems.

 This process is also referred to as the “risk cycle.” Many organisations use these tools to develop a program specifically meant for risk management. Other effective tools that are used during the risk management process are “risk register” and the “risk inventory”. Below is a description of how these two tools work.

RISK INVENTORY

Business Analysts MaxFunding.com.au says, “when it comes to risk inventory, the first thing that you are required to do is create an effective process for managing risks. This is vital since you never know when the risk may strike again. Therefore, you should acknowledge the opportunities and threats that you are facing and create an inventory of each of these elements.”

 

WHY START WITH RISK INVENTORY?

 The reason why business organisations start with risk inventory is that the first step of risk management is to determine the current position of an organisation. This helps in setting realistic goals and creating a plan on how to succeed.

 Another reason why business organisations start with risk inventory is that this program helps you to identify various potential risks. In average organisations, an inventory is taken by five members and generates 100 items or more. After that, the organisation breaks down this number by getting rid of errors and duplicates. After this process, an organisation may be left with fewer items or more.

RISK REGISTER

 The risk register can be used as a tool for tracking business opportunities and threats that arise from different sections. Furthermore, the risk register is used to drive accountability and awareness. The senior staff members can play the role of reviewing the risk register and find out how the organisation has dealt with each issue.

RISK CYCLE

 A risk register is an important tool since it is used to fulfil the risk cycle. However, this is achieved after prioritising and identifying risks. Business organisations respond to risks as a way of reducing threats and creating opportunities for business growth. Responding to risk also gives staff members room for improving overtime and modifying the risk register so that it can be easy to shift priorities. As if this is not enough, they also play the role of prioritising and identifying new risks that arise within the organisation and add them to the risk register. That means the organisation is able to respond, assess and improve. In other words, an organisation can rely on a risk cycle of resilience and accountability.