Question
Identify the steps of the risk management process.
Sample paper
Risk Management Process
Just like individuals, all business organizations face some degree of probability or threat of damage. In most cases, risks and losses are caused by both internal and external vulnerabilities that can be avoided if the company adopts defensive measures. The probability that the real return on the investment will be lower than expected can also refer to risk. However, a business organization can adopt a risk management that can help to reduce if not fully eradicate the adverse effects of risk. Risk management process comprises of forecasting and evaluating financial risks and identification of necessary processes and procedures to minimize their impacts (Larson, 2011). Different sectors of the economy face different risks and this call for different risk mitigation strategies. There is no one accepted risk management strategy. As a result, each risk should be investigated independently to determine the perfect strategy to use based on the prevailing conditions. This paper seeks to elaborate the necessary steps in risk management process.
As a team manager or a member of any business organizations, individuals manage risks in their daily operation. Learning the 5 step process of risk management is very crucial and is a necessity to each member. Mitigation of risk ensures smooth running of the project and a positive and friendly experience for all stakeholders.
- Identification of risk – the very first step involves the identification and uncovering of risk as well as description of its nature that might adversely affect the business. However, there are some techniques that can be used to identify the risk depending on the nature of the risk and the sector of the economy it affects.
- Analyzation of the risk – after the identification of the risk, the risk manager should try to determine the likelihood and impacts of each risk associated with the business. It is always prudent to develop a correlation between the risk and the goals of business through understanding the nature of the risk in question.
- Evaluation and ranking of the risks – considering that risks are inevitable, a business may face more than one risk at a single period. In such situation, a risk manager should evaluate each risk independently before ranking them by their likelihood and impacts. After ranking, the manager should decide whether to treat or accept the risk associated with the risk(Aloini, 2007).
- Treat the risk – this step is widely known as risk response planning. At this process, the risk manager sets out on a mission to mitigate or fully eradicate the negative consequences of the high rated risk one by one. Treatment of risk comprises of several techniques that include risk acceptance, risk ignorance, the spread of risk and risk insurance. Creation of risk mitigation strategies is very important to any organization to ensure that it is not affected by the occurrence of the risk.
- Monitoring and reviewing the risk – this is the final step in the risk management process that a manager should involve in. After the treatment of the risk, the manager should monitor the risk to establish whether the treatment technique and policy has effectively worked. In case, the treatment was not effective, the manager goes back to the drawing board and finds another treatment technique that should help in mitigating the risk. At times, a risk may require the use of more than one risk management strategies for it to be fully nullified.
References
Aloini, D. D. (2007). Risk management in ERP project introduction: Review of the literature. Information & Management, 44(6), , 547-567.
Larson, E. W. (2011). Project management: The managerial process.
