Why Risk Management matters ?
“We don’t manage risks so we can have no risk. We manage risks so we know which risks are worth taking, which ones will get us to our goal, which ones have enough of a payout to even take them,” said Forrester Research senior analyst Alla Valente, a specialist in governance, risk and compliance.
So, what is Risk Management and why is it so important ?
What is risk management?
Risk management is the process of identifying, assessing and responding to risks. This includes:
- Identifying the risk and its cause.
- Assessing the impact of the risk on your organization or project.
- Deciding whether or not to accept, avoid or transfer that particular risk. If you decide on acceptance, then mitigate it as much as possible through appropriate controls (elements like fire extinguishers). If avoidance is your choice, don’t do it! And if transferring would be better than all other options combined (and this is rare), then consider outsourcing part or all of your operations so no one has access except those who need it for their jobs only
Risk management is an important part of every business. It helps organizations identify, measure, manage and control risks to their success and survival. Risk management is an essential element in enabling companies to develop strategies that protect against financial loss and failure.
ISO 31000 Risk Management is the standard that guides on how to manage risk.
Risk Management matters at every level :
- Risk management reduces unexpected events
- Risk management makes jobs safer
- Risk management enables project success
- Risk management creates financial benefits
- Risk management saves time and effort
- Risk management prevents reputational issues
- Risk management guides decision-making
How to identify and assess risks
Risk analysis settles on obtaining a deeper understanding on which project tasks, outputs, or events would influence its success. This requires project managers experience, knowledge of the project, and critical thinking to decide on what strategies should they embark, from where tactics and activities will be based upon.
Performing risk analysis features two options a project manager can use depending on the identified risk source and its degree of detail: qualitative and quantitative analysis.
The Risk Management process
ISO’s five-step risk management process comprises the following and can be used by any type of entity:
- Identify the risks.
- Analyze the likelihood and impact of each one.
- Prioritize risks based on business objectives.
- Treat (or respond to) the risk conditions.
- Monitor results and adjust as necessary.
Risk management is so important for organizations ; It’s not just about identifying risks and taking action–it’s also about being prepared for the worst-case scenario.
You can’t control what happens in life, but you can make sure that your business or organization is ready for anything by thinking ahead and preparing accordingly.