Risk management is a logical method that deals with identifying, analyzing, resolving and monitoring risks in an organization, in order to minimize the loses. First of all, we need to define what risk means. It can mean everything that causes harm to an organization and interferes with its plans. It can affect a company, its employees or clients, its assets, etc. Risk management procedures are used in both public and private institutions, in finances and in other areas of activity.
Similar to other standardized management processes, risk management is well-defined. It has several steps, beginning with identifying the risks, as a first step. Next is the analysis, following by finding solutions to solve the problems. As a final step, monitoring of the organization needs to be performed constantly, as problems change and their influences change as well.
The risk management cycle begins by identifying the risks. This is done by taking the business context of the organization into account, as specific problems threaten different business contexts. Risk management professionals will evaluate how frequent a problem appears and what impact it has on the organization.
Next, the analysis needs to be performed. This part of the process is called risk assessment. Risks should be assessed both from a qualitative and a quantitative point of view. The ones that are most likely to occur and the ones will have the most severe consequences need to be determined, since they are dangerous to the organization. A prioritization needs to be done, so risk levels must be defined, judging by how severe the impact is. The levels are high, moderate and low. If a high level risk can have a damaging effect to the organization, a moderate level one will have a less devastating one. If a risk is low level, it may not affect the company in a damaging way and the management should decide if time and money resources need to be allocated to solve it or not.
High level problems should be resolved first, while the moderate and low levels ones should be handled next. Risk management consultants help organizations create a risk management plan with specific procedures for each level.
The business environment undergoes continuous change and so do the business regulations and the companies themselves. New problems are prone to appear, while others will become less threatening. That is the reason why risk management procedures need to be continuously reviewed and updated when necessary.
Similar to other standardized management processes, risk management is well-defined. It has several steps, beginning with identifying the risks, as a first step. Next is the analysis, following by finding solutions to solve the problems. As a final step, monitoring of the organization needs to be performed constantly, as problems change and their influences change as well.
The risk management cycle begins by identifying the risks. This is done by taking the business context of the organization into account, as specific problems threaten different business contexts. Risk management professionals will evaluate how frequent a problem appears and what impact it has on the organization.
Next, the analysis needs to be performed. This part of the process is called risk assessment. Risks should be assessed both from a qualitative and a quantitative point of view. The ones that are most likely to occur and the ones will have the most severe consequences need to be determined, since they are dangerous to the organization. A prioritization needs to be done, so risk levels must be defined, judging by how severe the impact is. The levels are high, moderate and low. If a high level risk can have a damaging effect to the organization, a moderate level one will have a less devastating one. If a risk is low level, it may not affect the company in a damaging way and the management should decide if time and money resources need to be allocated to solve it or not.
High level problems should be resolved first, while the moderate and low levels ones should be handled next. Risk management consultants help organizations create a risk management plan with specific procedures for each level.
The business environment undergoes continuous change and so do the business regulations and the companies themselves. New problems are prone to appear, while others will become less threatening. That is the reason why risk management procedures need to be continuously reviewed and updated when necessary.
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