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A Really Quick Guide to Business Risk Management

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Business risk management is the ongoing process of identifying and controlling business risk. Risk is the result of uncertainty. Generally speaking, all business endeavor is surrounded in risk such that there is significant payback from measures to reduce risk. The following are basic elements of business risk management.
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Risk Intelligence

Research to understand the risks surrounding your business. Seeks to uncover unknown unknowns.

Risk Identification

The process of identifying business risk. This may involve everyone in your organization as all stakeholders in a strategy are typically given an opportunity to identify risk.

Risk Analysis

Developing an understanding of identified risks including factors such as probability, impact and moment of risk.

Risk Probability

An estimate of the probability that a risk will occur.

Risk Impact

An estimate of the cost and other impacts if a risk does occur.

Moment of Risk

An analysis of the likely timing of a risk.

Risk Triggers

Conditions that cause a risk to become more probable.

Risk Exposure

The probable losses associated with a risk or set of risks. Typically calculated as probability × impact.

Risk Estimates

Estimates of risk probability, impact, timing and exposure for a set of risks.

Calculated Risk

Taking a risk after full risk management due diligence including risk intelligence, identification, analysis and treatment.

Risk Tolerance

The willingness of an organization, project or individual to accept risk. There is a relationship between risk and reward. Generally speaking, the more calculated risks you take, the more likely you are to enjoy rewards. However, risk can also lead to painful losses that may not be appropriate for an organization or individual.

Risk-Reward Ratio

An estimate of both the risks and rewards of an action expressed as a ratio.

Cone of Uncertainty

The tendency for uncertainty and risk to decrease as you make progress on a strategy or project. For example, the construction of a bridge may see large declines in risk exposure after its foundations are constructed on time and on budget.

Probability-Impact Matrix

A common way to represent the probability and impact of a risk as a matrix.

Risk Register

A database or list of risks.

Risk Treatment

An action that is taken to manage an identified risk such as risk avoidance, acceptance, mitigation, transfer and sharing.

Risk Avoidance

Changing your plans to avoid a risk.

Risk Acceptance

The formal decision to take a risk.

Risk Mitigation

Actions that reduce the probability and/or impact of a risk.

Risk Transfer

Transferring a risk to a 3rd party. For example, fire insurance.

Risk Sharing

Sharing a risk internally. For example, pooling resources to share the risk that a single resource will fail.

Risk Contingency

A plan for how you will manage a risk that actually occurs. At this point, the risk becomes an incident or issue.

Business As Usual

The process of continuing your regular business processes in a highly unstable and risky situation such as a war, disaster or acquisition of your firm.

Residual Risk

The risk that remains after your efforts to treat risk.

Secondary Risk

Risks that are caused by your efforts to treat risk.

Positive Risk

The risk of unexpected gains. This may be managed as part of risk management. A positive risk is very different from a regular risk as they are opportunities as opposed to losses. For example, a project may manage the positive risk that a task will be completed early by making plans to reallocate resources if this occurs.

Extreme Value Theory

Math that deals with unlikely probabilities. It is common to manage risks that are very low probability but very high impact such as the risk of a disaster.

Risk Management Plan

A plan to treat a set of identified risks. Includes a risk analysis and risk treatment plan. Stakeholders who sign-off on a risk management plan are accepting the residual and secondary risks identified by the plan.

Risk Monitoring

The process of monitoring identified risks and risk treatment efforts.

Risk Communication

The process of communicating risk information such as current risk exposure levels.

Resilience

The design of nations, communities, organizations, infrastructure, facilities, systems, processes, environments, machines and tools to be highly resilient to stresses. A resilient design can vastly reduce risk and simply risk management.
Overview: Business Risk Management
Type
Definition
The ongoing process of identifying and controlling business risk
Related Concepts

Risk Management

This is the complete list of articles we have written about risk management.
Acceptable Risk
Business As Usual
Business Impact
Business Risks
Calculated Risk
Cascading Failure
Contingency Plan
Contingency Planning
Disaster Preparedness
Dread Risks
Economic Risk
ERM
Financial Risk
Innovation Risk
Insurance
Investing Risk
Moment Of Risk
Plan Template
Political Risk
Positive Risk
Project Risk
Reputational Risk
Residual Risk
Resilience
Resource Risk
Risk
Risk Acceptance
Risk Analysis
Risk Appetite
Risk Awareness
Risk Capacity
Risk Communication
Risk Contingency
Risk Control
Risk Culture
Risk Estimates
Risk Evaluation
Risk Exposure
Risk Impact
Risk Intelligence
Risk Management
Risk Matrix
Risk Measurement
Risk Mitigation
Risk Monitoring
Risk Objectives
Risk Prevention
Risk Probability
Risk Profile
Risk Reduction
Risk Register
Risk Response
Risk Sharing
Risk Taking
Risk Tolerance
Risk Treatment
Risk Trigger
Risk-Reward Ratio
Seasonal Risk
Secondary Risk
Special Risks
Strategy Risk
Tactical Risk
Technology Risk
Unknown Risks
Upside Risk
More ...
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Risk Management

An overview of the risk management process.

Disaster Preparedness

The definition of disaster preparedness with examples.

Risk Prevention

The definition of risk prevention with examples.

Err On The Side Of Caution

The definition of err on the side of caution with examples.

Risk Appetite

The common types of risk appetite.

Risk Awareness

The common types of risk awareness.

Risk Culture

An overview of the common types of risk culture.

Contingency Plan

An overview of contingency plans with complete examples.

Enterprise Risk Management

A complete overview of enterprise risk management with examples.

Business Risks

A list of common business risks.

Relative Risk

How to calculate relative risk with examples.

Supply Risk

The definition of supply risk with examples.

Risk Capacity

An overview of risk capacity with examples.

Enterprise Risk

A list of common enterprise risks.

Cost Risk

The definition of cost risk with examples.

Pure Risk

The definition of pure risk with examples.
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