Risks Management
The overall goal of risk management is to measure and assess risk, but the ultimate goal is managing the risks once it is presented to your company. When we think of risk management, we overlook the importance of project planning, which is the specific standards and methods that are developed with respect to the risks that are going to be assessed overtime. The methods of analysis allow those that work in risk management to professionally assess and establish and identify risks before they appear. The analysis also allows you to manage, avoid, reduce impact, or transfer risk by implementing various alternative solutions.
What is a Risk?
A risk can be found in anything that we set out to accomplish within our business, that could potentially have a negative impact on a specific part that is of value. When it comes to business risks, all types of risks are of a concern, ranging from productivity, finances, leadership and development. Although we would love to avoid all risks within a business, they are unavoidable and it is your responsibility to make sure that you see these risks before they start to have a detrimental impact on the goals that you are trying to accomplish within your company.
Risk Management Methods
There are formulas and templates to narrow and help identify the risk that are presented to a business. There are many methods to help identify risks in their early stages, but the most common methods are scenario-based risk identification, objectives-based risk identification, taxonomy-based, and common risk checking. Staying up to date with bookkeeping, resource management and finances will help elevate the need to use these risk management methods.
Prioritizing Risks
Once a risk has been identified within your company, it is essential that you begin to prioritize the highest risk that has the potential to do the most damage, and then move on to other avenues that can help your company get back on track once the risk has been identified and dealt with. When we are dealing with a finance company, it is important to identify and prioritize the risk that is making your business lose the most amount of money, and implement changes so that this does not happen again.
Managing Risk
You are able to manage risk with a variety of approaches, ranging from risk transfer, risk avoidance, risks reduction and risk acceptance.
Risk Transfer
Involves transferring the consequences of a risk on to another party, or another division of your company. This is seen mostly within insurance companies, as well as if a contract is laid out to identify who takes the most of the risks within an overall business.
Risk Avoidance
This involves doing nothing to avoid the risk involved within the business. There is a downfall of this, because avoiding a large risk will avoid all opportunities to accomplish your overall goal that has been set.
Risk Reduction
Reducing a risk involves the overall measures that are put in place to reduce the potential loss associated within the risk.
Risk Acceptance
Risk acceptance is also risk retention, which is accepting the risks without taking any additional measures to prevent the loss or the chances that the risk will happen again. This is ideal if a risk will not create a large amount of loss within a company, although they are considered the most costly to manage.