What is Risk Management?

Risk management is the process of identifying, monitoring and managing potential risks.

Risk management is a systematic process of identifying, assessing, and mitigating potential risks that may affect the achievement of organizational objectives. Its purpose is to enhance decision-making by proactively addressing uncertainties and minimizing the impact of adverse events.

Three Phases of Risk Management

Risk assessment and analysis
- Phase one aims to find as many potential risks as possible. In order to this throughout your organisation effectively, you need experts in all fields of your organisation on board. Recognising a fault in a timely manner requires an intimate knowledge of that department.
- However, when you have people in place ready to call out those issues it can save a lot of time, money and resources further down the line.
Risk evaluation
- Phase two analyses the impact identified issues may have, in both the short and long term. It also encompasses evaluating the associated costs, benefits and other impacts you can expect when fixing these issues.
Risk treatment
- Finally, the third phase, risk treatment is the process of dealing with the risks which have now been both identified and evaluated. It also covers implementing change to ensure that the same risks have a minimal chance of reoccurrence.

A common misconception is that once these phases have been completed, your work is complete. However, this is not the case. These phases are an ongoing challenge that needs to be addressed and should be thought more of as a cycle rather than a project.

The frequency and depth of the analysis will vary with each organisation. Typically, organisations which are in shifting markets or have an agile working environment should be most vigilant when tackling these issues.

Benefits of Effective Risk Management

Improved Decision-Making
- Risk management provides decision-makers with insights into potential threats and opportunities, enabling informed and strategic decision-making.
Enhanced Resilience
- Proactively addressing risks enhances organizational resilience, enabling the organization to navigate uncertainties and recover swiftly from disruptions.
Stakeholder Confidence
- Effective risk management instills confidence in stakeholders, demonstrating the organization’s commitment to safeguarding its interests and achieving objectives.
Regulatory Compliance
- Many industries and sectors have regulatory requirements. Adhering to these standards ensures legal compliance and ethical practices.

Further Resources on Risk Management:

Learn more about minimising risks and other tools/methods available to improve the overall efficiency of your organisation with our Process Improvement Plan.
Source definition of Risk Management by The Economic Times.
Learn more on the topic from the Institute of Risk Management.