Business is a process of evolution in new environment and its sustainability. While running a business an organization faces many challenges and Risk. A smart approach to combat the challenges and mitigate the Risk is to analyze its components and evaluation. Risk management is inherently a pro-active characteristic of a Manager.
Risk management is the systematic approach of using practices, procedures and policies of identifying, analysing, tracking, controlling, delegating and communicating risks. Risk Management is a science as well as art. The science part involves identification, evaluation and prioritization of risks along with planned, organized effort to reduce, track and control the probability and impact of undesirable occurrence. The art part involves correct evaluation, prioritization and response planning. It is deliberate to mix science and art of risk management. The judgment of assessing & building response plan in its subjective part is an art but the systematic & repeated risk tackling approach with set of guidelines can evolve as a science. Like project planning, risk management evolves continuously
At a higher level, risk management involves
- Identification and recording of risk
- Evaluation of the possibility that can be attributed with the occurrence of risk
- Determine the vulnerable consequences that can be attributed to risk
- Identify strategies to reduce impact that may arise with occurrence of risks
- Prioritize risk reduction approach based on a strategy
- Assign resources to manage the risk in accordance with risk response plan
- Review & close the risk
Every Organization owns Strengths & opportunities, during business process it faces many challenges (Risk) & threats. When strengths overcome the challenges the new horizon opens and business starts flourish. A good organization manages a Risk, what actually Risk Management is ?
Risk management is the identification, evaluation, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events or to maximize the realization of opportunities.
Risks can come from various sources including uncertainty in international markets, threats from project failures (at any phase in design, development, production, or sustaining of life-cycles), legal liabilities, credit risk, accidents, natural causes and disasters, deliberate attack from an adversary, or events of uncertain or unpredictable root-cause. There are two types of events i.e. negative events can be classified as risks while positive events are classified as opportunities. Risk management standards have been developed by various institutions, including the Project Management Institute, the National Institute of Standards and Technology, actuarial societies, and ISO standards. Methods, definitions and goals vary widely according to whether the risk management method is in the context of project management, security, engineering, industrial processes, financial portfolios, actuarial assessments, or public health and safety.
Strategies to manage threats (uncertainties with negative consequences) typically include avoiding the threat, reducing the negative effect or probability of the threat, transferring all or part of the threat to another party, and even retaining some or all of the potential or actual consequences of a particular threat. The opposite of these strategies can be used to respond to opportunities (uncertain future states with benefits).
Certain risk management standards have been criticized for having no measurable improvement on risk, whereas the confidence in estimates and decisions seems to increase.
For example in present situation due to COVID-19, all aspects of business has faced adverse impact which lead to threats and adversity, some organizations tuned themselves to combat the challenge! New market strategy developed for online sales and product display and orientation on virtual platforms.
The online platforms has been developed to portray the product, the organizations that have tuned themselves for this paradigm shift are moving towards goal seeking and target achievement. So this trend shows policy decisions to overcome the Threats by their Strength.