The Importance of Risk Management in Business

Cara Mccarron

Informations

• Publié par: r2-financial
• Publié le: 07 février 2013
• Nombre de lectures: 103
• Langue: English

Extrait

The Importance of Risk Management in Business

One term that has become synonymous with doing business in any industry is risk management. It’s really not enough to just open your doors and start operations without thinking ahead.

Elements of risk are everywhere and when they are identiîed before they become an issue, it’s far easier to come up with viable solutions.

Keep reading to learn more about this critical business topic.

What Is Risk Management?

Basically, risk management refers to identifying, assessing and taking economic control of various business risks. Risk management uses a variety of diFerent tools to provide realistic solutions, and employees from several diFerent levels of an organization may be involved.

Some risks are easy to predict, while others are completely unpredictable and beyond anyone’s control.

Steps In the Process

Some of the details of a thorough risk management process include:

 Identifying all the risks that pertain to running your business

 Reviewing and estimating the likelihood they will occur

 Understanding each risk and how to respond

 Creating a system using the most eFective tools for each type of risk

 Putting the system into practice whenever necessary

Why Is Risk Management Becoming More Important?

The practice of risk intelligence and risk management is becoming more of an issue and more important in many industries because:

 Customers are more prone to litigation  The public is more critical  Insurance coverage isn’t as comprehensive  Legislation is more strict and extensive  Management is more cautious after learning from past mistakes

5 Key Risks All Businesses Face

All businesses face risks that are unique to them and risks that are the same. Here are îve that all businesses must deal with:

1) Development risk 2) Manufacturing and operations risk 3) Sales and marketing risk 4) Proît and loss risk 5) uture growth risk

When Risk Management Is Most Important

Risk management is an important factor all the time, but especially in situations where:

 A business has multiple sites  A business is too big for any individual to know all the potential threats  A business has operations overseas  A business has many suppliers or subcontractors  A business uses a wide range of processes

5 Qualities of a Good Risk Management Program

Every good risk management program has similar traits and qualities. Here are îve that all good programs share:

1)  The program is inclusive - it doesn’t rely on just one person or group inside the business to succeed. 2)  Approved by senior management - the active support of senior management will improve the likelihood of success.

5 Qualities cont…

3)

4)

5)

Transparency - a risk management program works best when then the goals, process and results are shared with stakeholders. Proactive - the program should include processes that take advantage of opportunities presented by variable risk. Complete - A good system addresses how risk aFects the company as a whole, it doesn’t just identify which ones are a threat.

Modern Risk Management

As more and more businesses increase their reliance on the internet, new risks are evident and more security measures must be put in place to address them. Some new age risks include:

 Privacy violations  Copyright, patent and trademark infringement  Employee online behavior  Noncompliance with foreign law  Increased risk of lawsuits

References

http://www.morebusiness.com/running_your_busi ness/management/Risk-Managment.brc MoreBusiness.com

http://www.cholarisk.com/riskmanagement.asp Cholarisk.com

http://www.aiu.edu/publications/student/english/ Business%20Risk%20Management.html Atlantic International University