Strategies of Risk Identification and Mitigation

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

Procedures for managing risks

Three steps can be used to assess and manage risks. One is how to identify the uncertainties. Uncertainties are the major source of risks. These circumstances are not clear and put the future of the business at risk. Examples of these uncertainties include fall in demand and the occurrence of any unforeseen circumstance that is likely to put the life of the business at risk. If these occurrences are not mitigated and taken care of before they occur, problems are going to occur when they finally affect the business. Managers are always keen and on the lookout for these circumstances. They have the potential to bring down a business (McClure, 2011).

Secondly, there is a need to conduct a risk analysis. The aim of risk analysis is to make sure that all the aspects of risk are identified. Risk analysis is important when it comes with the aim of making sure that the risk at hand is dealt with (Briggs & Edwards, 2006). Important aspects of risk analysis entail making sure that every angle of approach to solving a problem is approached. This is where the work of the analyst comes in. He or she has to assess and see the likelihood of the risk being solved through the easiest and cheapest way possible. In the meantime, managing risks needs the use of approaches that are important in bringing forth the best solutions possible (Adams, 1999).

Once the risk has been analyzed fully, the report is presented to the manager in charge who will in turn take appropriate actions relating to mitigation and protecting the business. Management requires that there be more than one suggested way of solving a problem of this nature (Office of International Activities, 2012)Top of FormBottom of F. Reasonably, this ensures that there is always an option in case the adopted solution method backfires. Managers at all times have to ensure that they not only involve everyone when choosing a solution method but also have to ensure that the chosen method is comprehensive enough in terms of solution. If the people on the ground are involved in the whole process, it will be easier to make progress since they assist in the implementation.

Finally, prioritization of risks is important at all times. Once the manager is aware of the pending risks, he/she will move ahead and prioritize them depending on the degree of dangers posed. Those risks that seem easier to solve are attended to first then the complex ones later. In all cases, risk managers always put to practice all they know about the best way to solve the risk. Once it has been clearly identified, which method is best, the best solution methods will be used (Donal, 2012). Risk prioritization is important when there are many risks that require diverse attention. When risks pile up and compete for attention, it might not at times be easy to solve them. Time and energy will be lost yet the risks will prevail longer. Addressing the most urgent and demanding ones first is important since it will give time each of them to be attended to appropriately. Looking at the state of affairs in a firm can tell which option is best solvable early.

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