Risk is a more or less predictable eventual hazard that may affect the outcome of a company and any associated projects. It will not be possible to eliminate all risks because zero risk does not exist. Learning how to deal with threats – before they occur – can save a company from going under.
The legitimacy of risk management
The validity of risk management is based on the company’s ability to anticipate a risk. Are you able to estimate the probability of risk occurrence and can the company predict the possible impacts regarding severity should the worst happen? How can one prevent these risks? And, if so, can the business lighten the effect?
These are questions that deserve specific answers. But beware, all risks are not predictable, and it will be necessary to consider improbabilities. Of course, it is inconceivable to consider avoiding all inherent dangers a company might face. However, it is essential to carry out a full and reasonable plan of the foreseeable potential risks. A rigorous analysis is a reasonable guarantee of success if the simple steps below takes place.
Establish and evaluating the number and type of risks
It is a question of considering all the forms of risks (human, financial, organizational, technological, and so on). Evaluating the risks can take some time, so it is crucial that risk management supervisors start the planning process as soon as possible. Not all risks have the same probability of occurrence, and not all risks are equal regarding importance. During this step, it is necessary to make a rational classification before acting.
Define the risks
For each of the risks, companies should ask themselves these questions:
- Can the risk be eliminated?
- Can the company limit the effects?
- Do they have to modify the progress of the project in question?
Identify the critical points and revise the process
Identifying the possible risks is a step often forgotten in risk management because risks are everchanging. The probability of said risks evolves as the project progresses. Some phases of the project are more at risk than others. They must be identified before proceeding. Contact David Johnson Cane Bay to learn more.