What Is Risk Management?

When the fundamentals of the business are about to change, there are risks that need to be addressed and to be managed. That is why you need to manage the risk.

Risk management is about securing “early mover” positioning in the marketplace. Management of strategic uncertainties requires an understanding of the key assumptions underlying the strategy and monitoring changes in the business environment to ensure that these assumptions remain valid over time.

Type of Risks.

There are various type of risk that risk management plans can mitigate such as;

1.Competition – Competitive advantage including the strategy of a competitor

2.Customer – Risk arising from the interaction with the buyers of product and services

3.HSSE – The exposure to loss resulting from health, safety, security and environmental aspects of the business operation

4.Finance – Risk associated with the finances of the Enterprise

5.Geo-political – Probability of loss due to political instability in the operating country

6.Governance – Risk arising from implementation of a framework of rules and practices

7.Human Capital – Risk of inadequacy in numbers or level of expertise of personal employed

8.Legal/ Regulatory – The potential loss that may occur to a business as a result of insufficient

9.Market – All risks associated with the price and quantity in the markets

10.Operational – Risk arising from execution of a company’s business functions

11.Partnership – Risk arising from operating a business under a unique orgazational entity

12.Reputation – Risk of impact to the business attributable

13.Socio-economic – Risks arising of relating to, or involving a combination of social and economic factors

14.Strategy – Exposure to loss resulting from a strategy that turns out to be defective or inappropriate

15.Supplier – Risk arising from the interaction with the parties providing materials required in conducting business

Risk Analysis Process

1.Identify the Risk

Reviewing the lists of possible risk sources as well as the project team's experiences and knowledge, all potential risks are identified.

2.Assess the Risk

Traditional problem solving often moves from problem identification to problem solution. However, before trying to determine how best to manage risks, the project team must identify the root causes of the identified risks.

3.Develop Responses to the Risk

Now the project team is ready to begin the process of assessing possible remedies to manage the risk or possibly, prevent the risk from occurring.

4.Develop a Contingency Plan or Preventative Measures for the Risk

The project team will convert into tasks, those ideas that were identified to reduce or eliminate risk likelihood.

Those tasks identified to manage the risk, should it occur, are developed into short contingency plans that can be put aside. Should the risk occur, they can be brought forward and quickly put into action, thereby reducing the need to manage the risk by crisis.

Source: http://www.bia.ca/articles/rm-risk-management