1. Keyword: risk management
A complete guide on risk management
Risk management is vitally important in an organization or a business as the element of risk looms large
in there. Hence, managing the risks is essential for a smooth running of the business. So, the
management of risks can be defined as a process of measuring and evaluating risk as well as finding out
new strategies to deal with it.
There are various ways by which risk can be managed and it varies according to the needs of individual
business or organization. The process of managing risk in an organization involves certain steps like
assessing the risks and building new strategies to reduce the risk. The strategies include steps like
avoiding the risks, minimizing the negative effect of the risk as much as possible and even accepting
some of the effects of any particular risk.
Basically, there are two types of risk management- traditional and financial. In the traditional way of
managing risk, the main importance is given to risks arising from legal or physical causes including
accidents, natural disasters, lawsuits and even deaths. But financial management of risks refers to
managing of risks with the usage of various traded financial instruments. Bigger organizations utilize
special teams of professional who are experts in managing risks but smaller business set ups mostly
employ their operational managers to deal with such risks.
The method of managing risks is based on a five-step procedure which is as follows:
Step 1: The very first step is to locate any potential risk in the organization depending on the industry
practices, culture of the organization as well as compliance.
Step 2: After the risks have been identified, they need to be evaluated to decipher the amount of loss
and also the probability of its occurrence in future.
Step 3: Next step is to find a probable solution for the identified risk.
Step 4: Do a review of the solution to be used for managing the risks.
Step 5: Then implement the specified solution to deal with the problem.
Programs for managing risks also involve a lot of difficulties with resource allocation being the primary
one. Most of the resources allocated to risk management could have been used in other important
profit generating activities. But above all, spending on risk management will actually help to reduce all
negative outcomes of risks in an organization.
Professionals who manage risks try to identify the potential risks and assess the losses the organization
might face in terms of liability, property and net income. This assessment is actually helpful in growth
promotion by constant earnings, profits and various continuous operations.