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Risk management simply explained

Risk management simply explained
Written by Ramit

Risk management got to be quite interesting and helpful I started helping some of my colleagues to manage risk in their projects and then realized. There’s a whole big wide world out there who needs help so the risk. All the brand has been going for about 10 years we’ve worked in over 40 countries every continent except the Antarctic it’s a bit too cold for us pretty much every

industry sector and all sorts of different kinds of risks.

Principle of risk management

Risk identification we can identify threats things that might go wrong we could also identify opportunities things that might go well and help us not all those opportunities will be equally good. So, we need to prioritize them some will be stupid ideas some will be golden opportunities.

So, we need some assessment and prioritization step, and we could do that using probability how likely is then opportunity to happen and impact. How helpful would it be just the same as? Threats once we’ve prioritized them then we need to develop responses. so, we don’t take risk process identifies assess plan and manage we can do that for opportunities find the opportunities pick out the good ones decide. what to do and do it and it’s the same as Threats. So, I’d say manage them together in an integrated cohesive single risk management process and then you have one process which serves two purposes minimizing threats and maximizing

opportunities we’re using the same resources the same process. 

For example, the excellence management requirement for flight industry, and healthcare industry, have risk management requirement, included in the preventive action clause.

These are the topics covered in below here.

Risk management importance

First, we will understand the definitions of risk and risk management. Then we will look at five key steps for managing risks. Companies face several internal and external factors, which make it uncertain, whether the company will meet its objectives. These uncertain events, or conditions, are called the risks.

Project and program but also strategic corporate environmental reputation health and safety counterterrorism fraud. So, we cover the whole risk picture the whole globe and it’s a very fascinating thing to be doing everyone knows risk is bad. What’s all this about good risk or positive risk upside risk is there such a thing as a good risk well. The man in the street would you like to

have a risk happen to you I’m sure he’ll say no but if we go back to the origins of the idea of risk I like to describe risk with three simple words risk is uncertainty that matters. There are lots of uncertainties in the world that don’t matter all risks are uncertain but not all uncertainties are risks so if we take the idea of uncertainty that clearly matters anything that might happen or

might not but if it did would hurt us and slow us down and damage value and cost more money.

That’s an uncertainty that matters and we need to manage it but there are other uncertainties that matter there are things in the future that could happen. They might not happen if they did happen, they’d be helpful so they would help us to save money save time increase our value and benefits enhance our reputation and rather than just relying on good luck we could look for those and manage them proactively. So, the kind of byline the tag of uncertainty that matters includes the bad things but also, the good things

Effective use of resources, and reassuring stakeholders. Instead of being unprepared for the threats and opportunities, lessons learned the risk management can help plan and prepare for them. This preparedness helps organizations in saving costs and time.

Risk management process can be divided into these five key steps.

It starts with having a risk management plan. The next step is to identify the potential risks and prepare a list of all risks.

This list of risks is then analyzed, using qualitative, and quantitative techniques, to identify high priority, medium priority, and low priority risks. 

  • Response is planned for these risks, depending upon the priority. Risks are then monitored and controlled. Risk management plan specifies the management intent, systems and procedures required for managing risks. 
  • Executed in the organization. That is, how the organization will identify risks. Once the plan is in place, identify risks is the first key step in actual management of risks. This is the process of identifying the potential risks, their root cause, and the risk consequences. Risk identification is a systematic process. During brain storming, no identified risk is evaluated, or criticized. 
  • The next risk management process, that is analyze risks, helps in deciding that. Organizations do not have resources to address all risks. After having the list of all potential risks, the next logical step is to analyze and prioritize risks. 
  • For risk analysis, qualitative and quantitative analysis are conducted. Qualitative risk analysis is a subjective analysis and is quick and easy to perform. One tool to conduct the qualitative analysis is probability and impact matrix. We will cover this tool in next few slides. 
  • The purpose of risk mitigation is to reduce the size of the risk exposure. This is done by either reducing the probability of the risk, or by reducing the impact. The risk transfer strategy aims to pass ownership for a particular risk to a third party. It is also important to remember that risk transfer almost always involves payment of a risk premium. Acceptance is passive when nothing at all is done to deal with the risk. Acceptance is active, when we decide to make a contingency plan, for what to do, when the risk occurs.

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Ramit

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