What is Risk management?
Risk management is the process of identifying, evaluating and prioritising risks, then identifying and taking steps to minimise these risks.
What is Risk management like?
Risk Management is like the safety features in a car. When you are out driving, you will encounter bends in the road or other problems which can impede your progress at full speed. If you apply the brakes at the right time, you will be able to travel round the corner safely, but without the use of the brakes, you might go spinning off of the road. If you had a car without safety features, people may not be keen to get into your car!
What is the purpose of Risk management?
The purpose of risk management is to ensure that firms and their employees are aware of potential risks which they may face. Once they are aware of these risks, they are able to take precautions so that they may be able to reduce the likelihood of these risks or the impact of these occurrences if they do happen.
What are the different types of Risk management?
Different types of risk management include:
Financial risk management – risks which could affect profits or cash-flow, such as regulations, market behaviour or credit defaults.
Health and Safety risk management – risks of physical danger to staff or customers.
Operational risk management –risks which could affect everyday operations, such as inclement weather, logistical issues or power cuts.
What’s involved with Risk management?
In order to take action to prevent a risk, the risk must first be identified. The risk management process is usually carried out using a flow chart to detail the risks associated with each of the proposed actions of an organisation, and then the flow chart will detail methods which can be used to reduce or remove the risk. There may be more than one risk associated with each proposed action, and there may be more than one way to reduce each risk. Those involved in risk management must be able to consider every aspect of a task to see the risks associated with it.
Where does Risk management fit into organisational management?
The term risk management can apply to any stage in the organisational process where there may be risk. Once a risk has been identified, any member of the team may be responsible for taking steps to reduce that risk.
How do Risk management impact on achieving organisational goals?
Risk management aims to reduce negative impacts on operational goals, thereby making it much easier to achieve operational goals.
Good financial risk management can help to protect profit and help to ensure that a company reinvests its money wisely.
Operational risk management will help to protect customer data and can help to ensure that cheap, high-quality products are delivered to clients on time.
Health and Safety risk management can help to ensure that staff are happy and safe in the work place. If staff feel like they are at risk, the quality of their work may suffer.
There are many other goals that good risk management strategies can help to contribute towards.
What terms are used in Risk management?
Risk – A danger or problem which may occur given a certain circumstance
Assessment – Spotting, evaluating and classifying a risk.
Reduction – A step which will lessen (but not prevent) the chances of a risk occurring or the effect from that risk if it does occur.
Avoidance- Steps take to prevent the risk from occurring.
Transfer – Passing the risk on to another party.
Implementation – Putting a risk management strategy into place.
Where can I find more information about a Risk management?