Risk Management is the process of measuring or assessing risk and developing strategies to manage it. Strategies include transferring the risk of another party, avoiding the risk, reducing the negative impact of the risk, and accepting some or all of the consequences of a particular risk. Traditional risk management focuses on the risks arising from physical or legal reasons.
Financial risk management, on the other hand, highlights the risks can be managed using traded financial instruments. Regardless of the type of risk, all large business risk management teams and small groups and business practice informal, if not formal, risk management.
ideal risk management starts with the creation of context, inclusive identity and objectives of stakeholders, as the basis of the risk will be assessed and define a framework for the process and program for the identification and analysis. The next step in the process is to identify potential risks -. Event when triggered, cause problems
The risk identification can start with the source of problems, or the problem itself. Once identified, they must then assess the potential severity of loss and probability of occurring. After the decision on a combination of methods to use for each exposure shall be. What risk management decision should be recorded and approved by the appropriate management level.
In as much as no first risk management plans will be perfect practice, experience, and actual loss results will necessitate changes in the plan and contribute information to allow possible other decisions to be in dealing with the risks faced. In the end, risk analysis results and plans should be reviewed, assessed and updated regularly.
Risk management also faces difficulties allocating resources. This is the concept of opportunity cost. Resources spent on risk management could have been spent on more profitable activities. Again, ideal risk management reduces costs while maximizing the reduction of the negative effects of risk.
If risks are improperly assessed and prioritized, time can be wasted in dealing with risk of losses that are not likely to occur. Spending too much time assessing and managing unlikely risks divert resources that could be used more profitably. Unlikely do occur but if the risk is unlikely enough to occur it may be better to simply retain the risk and deal with the consequences of the loss is in fact occur.
Prioritizing too much risk could keep organization from ever completing a project or even start. This is especially true if other work is suspended until the risk management process is considered complete.
Risk is simply carrying out a systematic analysis, assessment of the severity, choose cost effective strategies to minimize the impact of threat implementation risks to the organization. All risks can never be completely avoided or reduced simply because of financial and practical limitations. Therefore, all organizations have to accept some level of residual risk.
Copyright 2007 Ismael D. Tabije