RISK MANAGEMENT

RISK MANAGEMENT

  • To learn about the steps of the risk management process   

Key Learnings from the Video

1. Risk Context

For the proper management of risk, you should understand the context of the risk involved. 

Different businesses have different risks depending on various factors and operations. For example, the risk factors for a flower shop are the short lifespan of flowers, logistics management, delivery of stocks on time, stock to be sold on the same day, and consumable inventory.    

2. Risk Analysis and Consequences

Identify the risks and determine how it can harm the company/business. Risk analysis is all about developing an understanding of the upcoming risk by knowing:

a. Type of risk

b. Impact of risk

c. Time of risk

d. Risk is positive or negative

e. Risk is economic or financial

f. Stock market risk

g. Whether the risk is hampering operations

h. Whether the risk is the outcome of strategy opted

You should analyse the risk, measure its intensity, and understand its impact to avoid the negative impact of risk on the business.

3. Risk Assessment and Evaluation

A company should decide whether it is ready for the risk or not after the assessment and evaluation of the risk.

After assessing the impact of risk on the business/company, you can control the risk, mitigate the risk, and write steps to prepare yourself and your team to handle the risk.

4. Risk Mitigation

Decide and plan with your team on how to handle risk or minimise it. After identifying the risk and its impact, you need to plan how to safeguard your business from the risk and its effect. This is possible with the help of risk mitigation, which includes:

a. Prevention plan

b. Contingency plan

You should have a detailed understanding of the following things while framing a risk management plan:

a. Assume accept

You should assume (or identify) the risk and accept it as it cannot be avoided. This involves analysing the following:

  • Effects of risk in term of time and cost
  • Monetary losses due to risk

b. Avoid

To avoid and mitigate the risk, do the following things:

  • Take steps to make changes in process and systems
  • Inform team about the reasons for the change
  • Take feedback from the team
  • Encourage team

c. Control

Take actions to control the risk at the level that is acceptable to you.

For example, you can control technology risk by using state of the art and latest technology to protect business and data; this will be done by having an updated antivirus, and regular check-up of systems.

d. Transfer

You can transfer the risk by making changes in your business in terms of authority, responsibility, and accountability.  

Risk should be transferred to the individual who can control it. Risk transferability may result into complexity as it reduces your control and increases the dependency on others.

e. Watch and monitor

 You should monitor whether changes in the business environment impact a change in your business risks.    

5. Risk Monitoring

You should monitor the risk and also find whether with existing risk are there some chances of new risks.

To get an idea of the upcoming risk, you should track the execution of risk management and mitigation.

To monitor business risk focus on the following things:

a. Changes in risk

b. Impact of changes on the internal environment like organisational structure and external environment like competition, product, suppliers, etc.

c. Whether you are bearing risk more than your appetite to meet business objectives

6. Communicate and Consult

This step involves the following:

i. Keep management updated about the risk associated with the business

ii. Take regular suggestion on the risk factors

iii. Discuss regularly with employees to deal with risk

iv. Take regular feedback from team members on how to mitigate risk

Key Outcomes of the Video

  • To manage risk first understand the risk context  
  • Do discussions with employees to mitigate the risks in the best possible ways
  • Transfer risk by changing authority and responsibility
CRED GOES TO BADA BUSINESS 

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