What is risk management?
What are the benefits an organization can receive from the adoption of a risk management program?
Describe the risk management process. What roles do security and capacity play within the risk management process?
What is the purpose of a risk management methodology?
Describe the various risk management methodologies used for risk assessment.
In recent years, risk management is increasingly becoming one of the important components of the business. Any business decision has a degree of risk that is associated with it. Risk can be identified as any probability or threat or any other form of a negative occurrence caused by external or internal vulnerabilities. To be in a position to identify, evaluate and mitigate or treat these liabilities, a company needs to design and adopt risk management programs. Risks can come from different sources such as uncertainty in financial markets or threats from project failure. However, it is the duty of the risk management team under the stewardship of the risk manager to identify the type or nature of the risk and thus develop an appropriate risk management plan (Valsamakis, Vivian, & Du, 2010). Therefore, risk management should entirely focus on establishing the treats that are likely to affect the business, assess the risk, prioritize them and apply resources to minimize their effects on the business.
Benefits of risk management programs
Risk management programs are largely designed and implemented to minimize the negative impacts that may cause losses in an organization. Some of the advantages of risk management programs in an organization include:
- Providing insight and support to the board of directors – it is difficult for the board members to identify risks outside their area of expertise and experience and this is where the risk management programs provide advisory services to the board and the best course of action.
- See risks that are not apparent – some of the risks associated with a business decision are not apparent to most people. However, through comprehensive preventative risk management program provides an opportunity to identify and provide a deeper understanding of all types of risk (Dionne, 2013).
Risk management process
Project managers and team members should manage business risks on a daily basis. All risk management processes follow the same basic steps, although at times different language and words are used to describe these steps. Risk management processes encompass steps such as: identifying the risk that might affect the project outcome, evaluation of the risk by determining the likelihood and impacts of the risks, ranking of the risks by identifying their probability and impact. The fourth step involves the treating the risks by minimizing the probability of negative risks, and the final step focuses on monitoring and reviewing the risk.
Risk management methodology
Risk management methodologies comprise of an organized avenues to analyzing risk that addresses operational risks, security practices and the technology that is exploited to minimize the pre-determined risk. The primary objective of designing and implementing risk management methodologies is to identify, assess and prioritize the risks identified to find the best solution to minimize their impact on the business operations (Bessis, 2015). The process of designing risk management process should involve the identification of the assessment ground, the establishment of potential risks and treatment of the identified risks.
Risk management methodologies
Risk management comprises of all systems towards assessing, minimizing and managing risks. Some of the prominent risk management methodologies include a qualitative assessment that focuses on identification, analysis, and prevention of site-specific hazards. On the other hand, quantitative assessment as a form of risk management methodology which focuses on analyzing threats to project the evolution and accomplishment of a given system concerning the relevant parameter selection has been widely used in the manufacturing industries (Dionne, 2013). Risk management methodologies should help an organization to mitigate controllable risks while at the same time tolerate the acceptable risks to make sure that businesses do not incur any loss.
Bessis, J. (2015). Risk Management in Banking. New York, NY: John Wiley & Sons.
Dionne, G. (2013). Risk Management: History, Definition, and Critique. Risk Management and Insurance Review, 16(2), 147-166. doi:10.1111/rmir.12016
Valsamakis, A. C., Vivian, R. W., & Du, T. G. (2010). Risk management. Sandton: Heinemann.