By Steven Macdessi
Do you run your own business whether small or large? If yes then I am sure that you will be well aware of different risks associated with business. Running a business or even a project is not an easy job as you have to fight against thousands of risks related with your internal or external environment. Almost every single organizations works hard for ensuring its long term existence but at the end only those organizations actually survive who adopts risk management techniques. Do you know what risk management is and how you can apply it on your organization in order to get maximum benefits? If no then I am here to help you in this regard.
What is Risk Management?
Risk management is any technique, strategy or action plan followed to avoid or overcome the risk. On the other hand, risk itself is any unwanted situation that can result in huge loss. It can be anything such as a mishap or accident at your workplace, fires, tornadoes, earthquakes or any other natural disaster. Apart from this, there are various legal risks, the most common examples of which include fraudulent acts, theft, or sexual harassment lawsuits. Financial risks are also of great concern for the business owners. The risk management depends on specific type of risk present in your company.
Risk management is done by the risk managers who have a basic or master degree in this subject. They know about all types of risks and their possible solutions. These managers not only make the list of all possible risks associated with your particular organization but also make an action plan for avoiding and removing these risks. They adopt the latest strategies for risk mitigation. Almost every single organization hires a personal for risk management.
How to Apply Risk Management Effectively?
It is generally said that an efficient risk avoidance and mitigation plan can reduce the chances of loss that may occur up to 80% or even more. A large number of institutes including Project Management Institute, the International Organization for Standardization (ISO), the National Institute of Science and Technology, and actuarial societies have developed various strategies and risk management standards that may help you to avoid risk fully or partially. Generally five different steps are followed in order to apply the risk management effectively. Following is an overview of all these five steps.
It is the first and the most important step. In this step, the risk managers identify the specific risks associated with your business.
Risk Analysis and Prioritization
After identifying the risks, they are then analyzed carefully in order to know the extent of damage that may occur due to them. In this step, the risk managers also prioritize the risk. For instance, your organization is exposed to 5 different risks then they will be given numbering according to the extent of danger associated with all of them.
Risk Control and Loss Prevention
In this step, various strategies are developed for risk control and loss prevention. Different strategies are made to target different types of risks as a single strategy cannot be applied for controlling all the risks.
Risk financing, and Risk Implementation/Administration
In the last step, all the risk control strategies are practically implemented and results are then noted afterwards.
Some organizations follow all the above mentioned steps while other follows any 2 or 3 of them for ensuring applying the risk management effectively. The success of your risk management techniques basically depends on your skills and experience as well as your planning, organizing and controlling abilities.