Risk management cycle: identification, assessment, planning and implementation

Risk Assessment and Management

Risk management refers to s strategies adopted by an organization in order to protect itself from the foreseeable and unforeseeable dangers related to its operations. This is possible when a proper assessment of the risks and their causes is done. Uncertainties in a business may come from the change in government policy, shift in tastes and preferences, and fall in demand in the market (McClure, 2011). This study identifies ways in which business operations can be improved through proper risk assessment and management strategies.

Ways to assess risk

Risk assessment in a business requires the use of several metrics and measures such as market and performance analysis in its operations (Adams, 1999). In the present times in most businesses, the role of management much includes risk management. It also includes the making of plans to incorporate all the stakeholders in the firm for the purposes of establishing a platform where all the avenues of risk are understood and addressed fully. In case the risks occur in the absence of proper mitigation strategies, a business will encounter a big loss. While easing the work of managers, it is important that all the employees in a firm take part in managing the problems and assessing risks that a business might be facing (Hester, 2011). The latest development in the corporate world is to have an entire department that is in charge of risk management and taking care of assets of a company. This department will be doing their analysis on a continuous basis and reports to the top managers so that the appropriate action to be taken.

Risk management cycle

Risk management cycle is made up of four stages. These include identifying, assessing, planning and implementing of risks. The identification stage involves pointing out to the potential causes of risks and their likelihood of occurrence (Borodzicz, 2005). The stage of identification is done by the risk managers and is the first stage of the entire process. During the identification stage, any pointer to a risk will be accommodated for use for further scrutiny. The second stage of the data analysis is to assess the risk. Assessment will be aimed at identifying the extent and potential for risk to occur. In this stage, assessment will involve the use of measurement metrics that will determine what the magnitude and the urgency of the risk. Accurate analysis will give the manager a clear chance to make decisions on whether the risk is worth responding to or not (Briggs & Edwards, 2006).

The third stage involves planning how to respond to the risk. The risk managers and other senior management members do planning. The planning stage is important for the manager to get ready with all the requirements and knowledge on how to address the risk. During the planning stage, managers intend to lay down all the strategies that will be used in attending to the problem. As such, it is a crucial and determining stage. Lastly, the plan is implemented. Implementation is the actual execution of the blueprint in practice. Personnel will be deployed, and resources dispensed towards this objective. During the implementation process, care should be taken not to veer off from the intended plan. Frequent reviews should be undertaken throughout the stage as implementation to ensure that everything is done as planned (McClure, 2011).

Elements of effective risk identification

Elements of risk identification must exist in any organization. One element is that there should be transparency and accountability. The people in charge should ensure that the work being done in the firm is done in a transparent manner and that it should reflect the true nature of the work in the company. This will make it easy to understand what could be happening in the workplace. In this sense, the work of the manager will be to take the reports and assessment given by the junior staff and act upon them accordingly. Risk assessment can be difficult in instances where the information given by the junior staff is not clear enough to allow the manager to make an honest guess. It has been the norm in most businesses to look for the best avenues to make conclusions about the risk status using the reports submitted by the junior staff from the risk management department (Adams, 1999).

Another element of risk assessment is to know the urgency and severity. Some risks are too big and require attention in the immediate manner. Risk assessment is important if it can show the extent of the risk and its urgency. Timely mitigation of a risk is important since it brings an easy guidance to how to navigate in the event of the occurrence of a negative event. Management is important when it precisely assesses the both the likelihood and capacity of handling a risk (Lam, 2003). Risk assessment is not only the most crucial aspect of management but also the most appropriate way to ensure that the future of a company is secured and protected from facing collapse. In the modern days, risk managers have come up with ways that can used to assess risk in all dimensions that include the size, likelihood, and means of mitigation. Through the use of software, data about business progress

Importance of risk identification

Risk identification is important for any business. Managers of businesses cannot progress well without making sufficient conclusions about the nature of risks that are present at their place of work (Viardot, 2011). Risk identification is one way of making sufficient conclusions about the future status of a business. In this sense, businesses have to be made free of risks that can likely injure their future status (Berson, 2012). Once managers have conclusively made known all the risks they are likely to face, it becomes easy to carry out various operations of the businesses. Modern day managers have valued risk management so much that they now have departments within their control that deal specifically with risk management. Those who see it as an expensive practice to maintain an operational risk department normally outsources this service from the many already established risk consultants (Kendrick, 2009).

The common and recent forms of business risk analysis use of experts and software resources. This contrasts entirely to the previous days when it was done through a hunch and intelligent guesses. Risk management and analysis has become such a professional exercise that it is even taught in colleges as a course (Frame, 2013). In order to make ease the work of a manager, risk management should be delegated to a separate department with the capacity to do so. In the modern times, managers have realized this and are only occupying themselves with summarizing the work of the risk managers only and in other times concentrate on the most important work they have (Borodzicz, 2005).

Importance of record keeping to risk identification

Record keeping is the process where information and that is vital is tabulated and kept safe for use when needed. It is a continuous process because whatever occurrences keep changing and occurring all through the life of a company (Viardot, 2011). In the process where a company takes into consideration the need for change, these occurrences have to be recorded well. The information will be needed later. In the event this happens, managers will simply retrieve the information and use it appropriately. Management of assets is also a function of management that helps in the solution of risks and dealing with the nature of work that needs attention (Erskine, 2011). When there are no proper administration records, it becomes difficult to pinpoint the risks that a company may face in the future. In the most sophisticated companies, records are kept in a computerized manner where they can easily be retrieved (Stanton, 2011). Electronic filing system is more important than the paper filing system. The more easily it is to retrieve records, the more useful it is for decision-making.

The personnel involved in risk assessment and management

Risk assessment and management is a function that is performed by many categories of personnel in an organization. There are those who will be involved in data collection during research (National Academy, 2014). Top of FormBottThese are data clerks serving under the head of data analysis department. Ideally, there is a need to have the attention of middle-level managers who will be managing the lower level personnel such as the data clerks (Crouhy & Galai, 2010). They will also be coordinating with the risk managers I deducing what potential risks that are likely to affect a business. Once all information has been collected, the manager can be tasked with the responsibility of making a comprehensive decision on the next course of action (Reuvid, 2010). Risk management has its intrinsic value in the overall management endeavor. Such management decisions are only made after a serious analysis has been done on the availed evidence in the form of data (Hood, & Jones, 1996). Management is never possible without the basis for which to do so. This is the data and evidence collected at all times. Managers are responsible for the success of a company. This explains why they have to bother very much about the issue of risks in business. The occurrence of risks in reality can water down any progress that might have been made initially (Cook, 2012). Therefore, appropriate attention should be given to all the indicators of risk and appropriate counter action be taken.

Conclusion

Risk assessment and management are very pertinent activities that management has to handle. They are all conditions that are needed to ensure that the steady success path-taking place in a business is maintained. Risks have the potential to bring down a steady business trend and eventually lead to its total collapse of not solved. Managing risks need to be done using appropriate mechanisms that are timely and attract the due repercussions. A manager will need the assistance of everyone in the company in order to come up successfully with a solution to the problems that may arise from risks. Risk management departments are the latest phenomena in the field of management. These departments are tasked with the responsibility of creating a sufficient ground for the manager to deduce what could affect the business in the future. Their work will entail monitoring the progress at the business and collecting data that can be of use in knowing the risk status of the business (Borodzicz, 2005).

During the process of risk management, managers are always there to make the situation conducive by bringing skilled people to work in the department. They are the ones who will determine whether risk management will succeed or not. Since managers have a lot to handle, they will solely be relying on the information and advice from the risk managers for decision-making. As noted above, risks can be many and likely to come at the same time. This way, there will be a need to rank and prioritize them in order of need and urgency. Solutions will be based on the most urgent and serious being attended to first.