Risk management

From ArticleWorld

Risk management is a set of processes that are used in the analysis and measurement of risks as well as in the development of strategies for the management of risks. Some of the strategies utilized in risk management include actions such as the transfer of risk, the acceptance of all or part of the risk, avoidance of the risk and the reduction of the negative effect of the risk. Risks in businesses can include natural disasters such as hurricanes or earthquakes as well as other risks that include fire, accidents and lawsuits. Some aspects of risk management can focus on one particular field such as financial risk management.

Steps in risk management

There are many steps in the risk management process. These include:

• The establishment of the context which includes the organization of the process being assessed and the identification of the objectives.
• Identification of possible risks is the next step. Here problems are identified based on either the source of the problem or the problem itself.
• Assessment follows the identification of the risks. The severity of the problem or the probability of the risk is analyzed. This is important in the implementation of a risk management plan.
• The potential treatment of the risks follows the identification process. This uses risk management strategies such as risk transfer, avoidance, reduction or acceptance.
• The creation and documentation of the plan follows and includes the proposed treatments for the identified risks.
• Implementation of the risk management process for the identified problems and risks.
• There must always be review and evaluation of any risk management plan as they are never perfect.

Limitations

If the assessments of risks are not through there is the wastage of time and resources. Also if too much time is spent on risks that are unlikely to occur this can be counterproductive. Although unlikely or rare event do occur it is often better to keep the risk and deal with it if it occurs.