Risk Management
The recognition, analysis, and reaction to risk elements that are inherent in a business's operations are all included in risk management. Effective risk management is acting effectively rather than responsively in an effort to influence future events as much as necessary. As a result, good risk management has the potential to lessen both the probability of a risk happening and its possible consequences (CFI Team, 2022).
Risk management process (Thomas, 2022)
- Identify the Risk
- Analyze the Risk
- Evaluate or Rank the Risk
- Treat the Risk
- Monitor and Review the Risk
Identify the Risk
Finding the risks to which the company is involved in its operational environment is the first step in the risk management process.
There are many different types of risks:
- Legal risks
- Environmental risks
- Market risks
- Regulatory risks etc.
The majority of these risk factors should be found, if at all possible. In a manual approach, these risks are manually noted. All of this information is submitted immediately into the system if the organization is using a risk management solution.
The advantage of this technique is that any organization users who have access to the system can now see these risks. Anyone who wants to discover which risks have been detected can access the information in the risk management system rather than having to request a report with this valuable information locked away inside.
Analyze the Risk
Risk must be analyzed after being recognized. Evaluate the risk level first. Understanding the relationship between risk and various organizational characteristics is also essential. It is necessary to look at how many business operations the risk affects in order to decide the risk's importance and complexity. There are dangers that, if they occur, might put the entire business at risk, while other risks will, according to the research, barely cause small inconveniences.
Evaluate or Rank the Risk
It is necessary to rank and prioritize risks. Depending on the risk level, the majority of risk management solutions have multiple types of risks. Risks that could result in little inconvenience are rated lower than risks that could cause massive loss, which is rated highest. Ranking risks is essential because it gives the business a comprehensive understanding of its overall harm. The company may be exposed to a number of low-level risks, but senior management may not need to get involved. On the other hand, even one of the worst threats is sufficient to call for urgent action.
There are two types of risk assessments:
- Qualitative Risk Assessment
- Quantitative Risk Assessment
Treat the Risk
It is essential to minimize or completely remove any risks. Connecting with subject-matter specialists in the area where the risk is present enables this. In a manual situation, this requires getting in touch with each and every stakeholder before scheduling meetings where everyone can voice their concerns. The issue is that the conversation has been divided into numerous email threads, various spreadsheets and documents, and numerous phone calls. A risk management solution allows for the system-wide communication of all relevant stakeholders. The discussion of the risk and potential solutions can happen inside the system.
Monitor and Review the Risk
Some risks cannot be completely erased; they are always there. Among the risks that must continually be evaluated are market risks and environmental threats. Under manual methods, committed staff performs monitoring. These experts need to be careful to keep a close eye on all risk variables. The risk management system keeps track of the organization's whole risk management plan in a digital setting. Everybody may see any change in quality or risk right away. Additionally, computers are much better than people at continuously assessing threats. Additionally, risk monitoring enables your company to maintain stability.
Importance of Risk Management
Because it provides a company with the tools it needs to effectively identify and manage potential risks. When danger is identified, it is simple to manage it. Additionally, risk management gives an organization a structure on which to make smart decisions (CFI Team, 2022).
The greatest method for an organization to be ready for events that can limit progress and growth is to identify and manage risks. A company's chances of success increase when it analyzes its strategy for dealing with significant risks and then creates structures to handle them.
Common Risks in HRM
References
CFI Team, (2022). Risk management. CIF Team. [Online] Available at:
https://corporatefinanceinstitute.com/resources/knowledge/strategy/risk-management/ [Accessed on: 27/08/2022]
Thomas, C. (2022). Five steps of risk management process. 360 factors. [Online]. Available at:
https://www.360factors.com/blog/five-steps-of-risk-management-process/ [Accessed on: 27/08/2022)
wow how well you write and deeply well inform the topic
ReplyDeleteI think learning on ways of managing the workplace risks is important for every person despite if his/her job role.
ReplyDeleteKeep up the good work Piyumi 👌
very very attractive post, fantastic. keep up the good work
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ReplyDeleteIdentify risks and prepare to the risk is a good practice. In modern business environment is very competitive and wold political situations are also very different. Technology is improving and changing day by day so risk is everywhere. So risk management is very important to achieve business goals.
ReplyDeleteReally a great post. I hope to see many more like this.
ReplyDeleteMitigating risk definetly giving the advantage of win win situation in difficult times. Thank you for the informative post.
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