Risk management is the method of finding, evaluating, monitoring, assessing, and controlling the impact of the situations. It is a comprehensive strategy that identifies the elements of risk for the development and implementation in any company. Risk Management identifies the risks and threats for the objectives of the company. Many external and internal factors cause risk to decrease the development of the company. For example, causing deformation of company, doing something harmful to the company that may hurt the employees or customers of the company.
In general terms, Risk Management is to reduce insecure circumstances by finding, testing, and by controlling the threats utilizing company resources available to management. In Risk Management, the consequences may be having a positive or negative impact.
Risks or threats caused by various elements and change the position, development, production of the company. Risks may cause a higher risk causing a massive loss to the company and lower risks may cause a small-scale loss. The risk recognized in the beginning is easily manageable in the starting stage. The threats become a risk to the company.
Risk Management Committee
The company to protect itself from risks consists of a committee for the board that is Risk Management Committee. It mainly consists of the Board of Directors. This committee takes the responsibility of looking after and assessing the risk management of the company. It should make sure to achieve the objectives for the company by pertaining the suitable strategies, performance, and consistency.
The risk management committee keeps an eye on risk management and finds the risk and plan of action at the right time. Later, it keeps track of outcomes and advises the board regarding the strategy to get over the risks.
7 Steps of Risk Management Process
The seven key steps of the Risk Management process clearly explain the process to overcome the risks or threats of the company. With these steps, there is a decrease in the downfall of the company. They are as follows:
- Determine the situation or risks of the company.
- Find the probable risks.
- Assess the occurrence.
- Take prospective remedies.
- Build risk management strategies.
- Evaluate and review.
Step 1: Determine the situation or risks of the company
This is the first step of the Risk Management process. To determine the risk firstly identify the problem that employees and customers are facing. Recognize the way to solve the risks to achieve the objective with the available resources of the company. It should keep a check on the negative impact on employees and customers of the company.
Step 2: Find the probable risks
Think about the problem in prior rather than thinking about the risks that occur to the company. It is better to look into the problems based on their classifications like property, policies, perpetuation, etc. Most of the companies think about the risks probably to curtail them. This method is helpful to look into it easily and it is one of the key steps of the Risk Management process.
Step 3: Assess the occurrence
It is a critical method in risk management. The company risks are assessing and analyzing the extremity of the loss and nexus of circumstance. Mainly assessment finds the course of the action to the risks. The assessment work completes after that, it is easy to achieve the objectives of the company.
Step 4: Take prospective risk remedies
After finding the risks of the company, they follow the right path for the action. To solve the risk of the company taking the probable strategies is essential. For finding the solution, there are some scenarios to be followed. They are:
- Eliminating the risks by changing the plans.
- Reducing the risk by taking some measures.
- Retaining the company from the loss.
- Transferring the risk to another company.
Step 5: Build risk management strategies
Create a proper strategy and make sure that it can get out of the risks. Risk management should come up with a strong plan where it can solve the issues of the company. The measures, strategies, or plans that are taken should reduce the risks of the company. The strategy should be framed to reduce the risk and threats. However, planning is important to control the risks of the company.
Step 6: Execution
Execution is one of the important steps in the risk management process. Once the proper planning is done executing the plan at the right time is very important. It’s a vital role to assist with the profits and to get over the risks. After the execution of the plan, the management can act accordingly and make changes in the company.
Step 7: Evaluate and review
After implementing the strategy the risk management should check whether there is desired impact or not. It should also make sure that implementing it correctly or not. The evaluation helps in offering review to the company whether it is getting over the risks. By this, it can define the objectives of the companies linking it to the outcome.
Conclusion Of Risk Management
Risk management can make the company get good results in solving the risks and threats of the company. There are mainly seven steps that are discussed which explain how to overcome the risks. It also makes us understand the step that should be taken at the prior level. Handling the risks or threats at the starting stage is the better prevention to the downfall of the company.
No one can predict the future in the same way the companies don’t know what happens in the future. Even though we can’t predict the future we can use our past experiences to make strategies and plan. Based on this we can control and overcome the risks. These steps safeguard us from the destruction of the company and develop the company.
Risk management should work effectively for the company. They can develop a secure environment for the employees, customers, clients, and others. This management can mitigate the probability of occurring threats and risks. There are many challenges for risk management that they should keep the track of day-to-day activities that occurs in the company. They have to keep an eye on the business activities and should be ready to face the challenges and that is very important for the development of the company.