Overview of Risk Management

on
Risk Management is the forecasting and evaluation of financial risks together with the process to avoid or minimize the impact of the risks. Understanding the risks will help the organisation in achieving the long-term success. Risk management should be transparent, responsive, and systematic and should be capable of improvements.
  1. Benefits of Risk management include-
  2. Fewer shocks and unwelcomed surprises. 
  3. Effective use of resources
  4. Reassuring stakeholders
  5. Saving cost and time
Risk management process can be divided into 5 key steps-
  • Plan risk management- This includes systems and procedures required for managing risks. It specifies how the organization will identify risks, how these risks would be analysed, how the analysed risks will be responded with and the risks will be monitored and controlled.
  • Identifying risks- This is the step in which potential risks are identified, along with their cause and their consequences. This is a systematic process and a group effort is required. People involved are management employees, customers, other stakeholders etc. Tools for identifying risks can be SWOT analysis, flow diagram brainstorming etc.
  • Analyse risks- After having the list of potential risks, the risks are prioritized. Some risks may need action plan but some may only need periodic monitoring. The risks can be analysed in two ways – qualitative risk analysis and quantitative risk analyses. Qualitative analysis is more subjective and quick to perform whereas quantitative analysis is more analytical and detailed.
  • Plan risk response- Risk response tries to reduce the impact and chance of negative risks. The four risk responses for negative risks are – eliminate the possibility of risk (risk avoidance), reduce the probability of risk impact (risk mitigation), Transfer the ownership of risk to a third party(transfer), accepting the risks if no action is feasible(Accept).
  • Monitor and control- This step includes regularly reviewing the identified risks and ensure that these are still relevant.
Thank You
Regards
Author- Nikita Maria
Kautilya 
IBS Mumbai

Comments

Post a Comment