Abstract
The
process of starting or developing a business has always required the taking of
risks. On the basis of taking the risks, it is mission-critical that the
business management identifies, analyzes, controls, and manages all the risks
involved. Furthermore, it is sensible to do this using a methodical framework.
Currently, there are various approved and suitable methods through which such
business managements can analyze and manage all the existing risks. However,
each has different definitions of risk management which are confusing. While we
are at, this paper will look at risk management, risk assessment, risk identification,
and various risk control strategies in a bid to manage risks.
Risk
management is increasingly becoming a mission-critical business driver.
Additionally, business stakeholders are becoming more concerned about risks
that a business faces. The risk may present itself as a strategic decisions
driver, cause of uncertainty in the business activities, or it may be embedded
in the business activities. Employing an enterprise-wide approach to risk
management enables a business organization to consider all the potential
impacts of various types of risks on all its processes, stakeholders, goods,
services, and activities.
Risk Assessment
Risk
assessment is the process through which an individual or an organization
determines a qualitative or quantitative estimate of risks in relation to a
specific situation and a known threat. Therefore, there are two possible risks
assessments that an organization can engage in:
(i)
Qualitative risk
assessment
(ii)
Quantitative risk
assessment
However
the risks assessment is looked at, it helps in identifying the threats,
evaluating the risk associated with the threat, and ultimately coming up with
ways of eliminating or controlling the threat (Hester & Harrison, 1998).
Practically,
the process of risk assessment involves a thorough look at a workplace thus
identifying situations and processes that may cause harm especially to the
employees and other people within the workplace. Having identified the
situations and processes, the risk assessment team evaluates the likelihood and
severity of the risk. A decision is then made of what measures should be taken
to prevent or control the harm from occurring.
Risk Management
Some
of the risks faced by the organization at the moment are uncertainty in the
financial markets, project failure threats, legal liabilities, accidents,
credit risks, and disasters among many others. Therefore, businesses need to
manage such types of risks. Risk management is the process where a business
organization identifies, evaluates, and prioritizes the risks. This process is
closely followed the coordinated, systematic, and economical application of
various resources to minimize, monitor, and control the likelihood and effect
of the risk. The process also seeks to maximize the realization of various
business opportunities (Hopkinson, 2011).
The
goals and objectives for implementation of the risk management is assuring
future uncertainty does not deflect the endeavor from the organization’s business
goals and objectives. Risk management has recently expanded the process thus
including risks in relation to the accidental losses as well as financial,
strategic, operational, and other risks according to the business an
organization engages in. There are various strategies available for business
organizations which would like to manage risks successfully and properly. The
strategies are risk assumption, risk avoidance, risk retention, and risk
transfer among others.
Risk Identification
Risk
identification is the process, in which an organization determines various
risks that have the potential to prevent the program, enterprise, or a business
investment from achieving its goals and objectives. The process includes more
of documentation and communication of the concern identified. Risk
identification is the critical and the first step in the long process of risk
management.
Participants
in the process of risk identification include project team, organizations risk
management team, subject matter experts, clients, end users, project managers,
outside experts, and other stakeholders. Risk identification is an iterative
process whereby, the first iterative process may be conducted by some members
of the project team or the risk management team. On the other hand, the entire
project team and other major stakeholders may conduct the second iteration. In
order to avoid bias, outsiders not involved in the business activities may
conduct the final iterative process (Vellani, 2007).
The
team concerned with risk identification and business activities can develop and
implement a simple and effective risk response as the process of risk
identification is ongoing.
Risk Control Strategies
Upon
identification of the risks and development of the contingency plan, the risk
management team can develop and implement risk control strategies. Risk control
is about selecting and implementing strategies to prevent and control various
risks. Risk control strategies fall in (Kaliniecka, & Shawe-Taylor, 2008):
(i)
Pre-planned:
Preventive strategies that a business organization adopts early in the event of
management process
(ii)
Situational:
Responsive strategies adopted by the business organization according to the
feedback during the event management process.
For
each of the risk identified by the risk management team, there are one or more
strategies available to control it. The main strategies are:
·
Avoidance: It is the most
effective strategy whereby, the organization eliminates any chance of loss of
avoiding the risk.
·
Risk Control: It
is the actual process of managing the risk. The risk management team takes
proactive steps aimed at reducing the identified risk where possible and
putting procedures that will minimize the residual risk thus reducing any
chance of loss.
·
Risk Transfer: This
is the process where unwanted risk is transferred away from the business
organization to another organization or person. It may be transferred through
law, the contract between parties, or conventional insurance policy.
·
Loss Reduction: It
is a response plan that addresses possible actions in the event of the
occurrence of loss.
·
Self-Retention: The
strategy helps in managing uninsurable risks or negligible and infrequent
losses that the business organization can manage internally.
·
Resource Duplication: A
strategy where the business organization maintains backup facilities or having
a contingency plan to address the occurrence of an unexpected situation that
interrupts business operations.
Conclusion
None of the businesses in the modern times
would like to have a loss associated with risks and threats. This is because
risks and threats can be avoided. As much as the risks can be avoided, they are
also known. Knowledge of risks is also mandatory before proceeding on various
ways through which they can be managed. This paper has discussed risk
assessment, risk management, risk identification, and risk control strategies
with regard to the current risks that organizations are facing today. However,
there are more than what appears in that which requires more research to
unearth.
References
Hester, R. E., & Harrison,
R. M. (1998). Risk assessment
and risk management. Cambridge, UK: Royal
Society of Chemistry.
Hopkinson, M. (2011). The project risk maturity model:
Measuring and improving risk management
capability. Farnham, Surrey, England: Gower.
Kaliniecka, H., & Shawe-Taylor,
M. (October 01, 2008). Promoting positive risk management:
evaluation of a risk management panel. Journal of Psychiatric and Mental Health Nursing, 15, 8,
654-661.
Vellani, K. H. (2007). Strategic security management: A
risk assessment guide for decision makers.
Amsterdam: Butterworth-Heinemann.
Sherry Roberts is the author of this paper. A senior editor at MeldaResearch.Com in best custom research papers if you need a similar paper you can place your order for custom college essay services.
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