Everything you need to know about risk management

A risk management plan is essential to every organisation. It helps provide structure, streamlines different functions of the organisation and also helps gain a basic understanding of the business. Implementing a risk management plan is a simple process which involves identifying, analysing, and managing risks. This helps protect the organisation from predictable and unpredictable circumstances. Here are some steps to help create a RM plan.

Identify risks

Identifying and recognising the types of risk you have is important to the risk management process. The best way to identify risks is by looking at the company’s internal risk history, consulting compliance/risk officers and conducting research. Considering that the industry is dynamic in nature, researching the regulatory climate is an important part of this step.

Risk Analysis and Impact Assessment

Many organisations use a risk map to measure their risks, their frequency and the levels. A risk map helps specify which risks are frequent in nature, the ones that would have low impact, and which are very likely and would have a significant impact on the business. Estimating the recurrence and gravity of your risks will show you how to utilise your time and resources while prioritising risks. (I can do another post on risk mapping sometime soon.)

Finding solutions

Now here comes the most important step. The best way to treat any kind of risks is by accepting, avoiding or controlling depending on their frequency and gravity of the situation. Risk acceptance usually occurs when the benefits of an activity takes precedence over the potential risks. Risk avoidance is non-participation in a particular activity in order to steer clear of such risk. While, risk controlling is a way to reduce the risk by either preventing it or mitigating the risk by reducing the repercussions it may have on the organisation.

Implementation

Once all prospective risks are analysed and relevant solutions are established, it is time to implement risk mitigation methods that would provide your organisation with the best possible outcome. This will involve resource allocation, consulting with the senior management and finance team for approval and ensuring that the team members are trained and made aware of regarding the risk mitigation strategy.

Audit

Risk management is an ongoing process with no one size fits all approach and hence requires to be monitored and audited from time to time. The risk environment is constantly changing and needs to be reevaluated systematically in order to be adaptable and prepared. This involves examining whether the approach is productive and whether it requires changes or necessary updates.

Creating a clear and consistent risk management system and culture within any organisation is so essential in today’s time with every company being so susceptible to different kinds of risks. This would subsequently lead to being aware of the current risk climate and making informed decisions based on it.

Please note that all opinions made on this blog should be treated as a guide and not legal advice.