Risk management is the process of identifying, assessing and prioritising risks faced by an organisation. But it doesn’t end there, once these risks have been established they can be reduced, monitored and controlled. Lastly, opportunities can potentially be presented as a result of risk, and thorough risk management looks at how they may be made beneficial.
Risks can relate to finances, legality, management error, accidents and even natural disasters. Predicting and attempting to manage risks is an important practice for all organisations. When we understand the risks we face, only then can we develop contingency plans to avoid them, or minimise their effects.
Why do we need risk management?
Risk management helps identify potential risks before they occur, helping to plan and reduce the adverse impact of risk on an organisation or project. Risk management helps organisations achieve their business goals by turning opportunity into growth.
How do you perform a risk assessment?
The steps to performing risk assessment are :
Step 1 - Identifying the hazards
Step 2 - Identifying the impact of risks and who may be affected by them
Step 3 - Evaluating risks and formulating a plan of action
Step 4 - Documenting findings and implementing them
Step 5 - Periodic review of assessments, updating wherever necessary.
What are the five basic principles of risk management?
Risk identification - As the name suggests, risk identification is all about identifying risks faced by an organisation or project.
Risk analysis - Once a risk has been identified, analysis is then conducted. Questions should be asked, such as; how often might this particular risk pose a problem?, and what could be the severity of losses incurred?
Risk control - Risk control is preventive measures taken to avoid and mitigate risk
Risk financing - This involves the funding of losses incurred as a result of risks
Claims management - Claiming processes concerned with recovering damages caused as a result of a risk occurring.
How do you differentiate between risk assessment and risk management?
Risk management - Are the efforts made by an organisation to reduce the possibility of risk occurring.
Risk assessment - Is the process of risk management, whereby specific problems and issues are resolved.
Who conducts a risk assessment?
It is the responsibility of the employer to conduct risk assessments. An appointed licensed agency or individual can also carry out a risk assessment on behalf of an organisation.