The Sooner You Understand Risk Management The Better

Top Five Benefits of Risk Management

One of the important elements in running a business is to balance business strategy with risk management. Organization would appreciate risk management better after reading the following benefits of risk management for a business. First, organization will easier identify trouble spots in ongoing projects before it escalates. Then, risk management encourages the organization to be better prepared to eliminate potential threats. After that, risk management could provide higher quality data for organizations in the decision-making process. Next, through risk management, budgets can be more accurately estimated and rely less. Lastly, due to risk management, escalations of risk from project team to senior management could be clearer and easier.

Have You Successfully Implemented the Risk Management?

The most necessary thing to ensure a successful risk management implementation is the commitment of highest level of organization leadership. Leaders should carefully determine the elements that are required and best fit the unique culture and operating rhythm of their organization. There are at least six questions that shall be answered by the organization to ensure the successful implementation of risk management and these questions will be about Business’ mission, strategy and objectives, Risk Identification, Analysis, evaluation and prioritization, Risk response and treatment, Monitor, review and report, and Periodic review.

Seven Steps to Establish a Firm Risk Management Process

Risk management becomes very crucial for organization or company, both in small and large scale. There are several steps in the building process of risk management based on ISO 31000 that could be implemented by organization. First, establish the context: consider the goals and objectives of the organization and the environment in which it operates. Then, identify existing and potential risks as well as existing controls. After that, estimate the likelihood that risks will materialize as well as evaluate the risks on a continuing basis. Next, develop strategies to manage the identified risk and communicate or consult with all parts of the organization, as well as outside parties, to ensure that all are kept well informed. Lastly, monitor and review the risk management strategies on an ongoing basis.

Three Risk Types You Need to Overcome

A discussion of currently practiced risk management is not complete unless inherent risk, current risk, and residual risk are addressed and overcome by the organization. Firstly, inherent risk is the risk that naturally exists in the absence of controls. Secondly, current risk is the actual risk today, given current risk responses inherited or applied. Lastly, residual risk is the risk that remains after controls have been accounted.

Conclusion

Risk management as an important element in running a business surely provides many benefits for organization and there are six questions that shall be answered by organization to ensure whether risk management has been successfully implemented or not. In addition, as risk management is very crucial to every business from all sizes, organization and company shall understand the proper steps to establish a firm risk management process based on ISO 3001 as well as understand the risk types to overcome.

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References

ISACA®. (2018). Getting Started with Risk Management [White Paper]. ISACA®. www.isaca.org/Getting-Started-With-Risk