What Is Risk Management?
Risk Management is the process of identifying, analyzing and responding to risk factors throughout the life of a project and in the best interests of its objectives. Proper risk management implies control of possible future events and is proactive rather than reactive.
Why do Risk Management?
Risk management is important in an organisation because without it, a firm cannot possibly define its objectives for the future. If a company defines objectives without taking the risks into consideration, chances are that they will lose direction once any of these risks hit home.
The purpose of risk management is to:
- Identify possible risks.
- Reduce or allocate risks.
- Provide a rational basis for better decision making in regards to all risks.
How To Do Risk Management
Various sources of risk include Poor project management , Predictable external factors such as market and operational risk, Unpredictable events such as natural disasters, technology related risks, legal such as trademark violation etc.
The Risk Analysis Process
The Risk Analysis Process is essentially a quality problem solving process. Quality and assessment tools are used to determine and prioritize risks for assessment and resolution.
The risk analysis process is as follows:
- Identify the Risk
- Assess the Risk
- Develop Responses to the Risk
- Develop a Contingency Plan or Preventative Measures for the Risk