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.
Research to understand the risks surrounding your business. Seeks to uncover unknown unknowns.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.
Developing an understanding of identified risks including factors such as probability, impact and moment of risk.An estimate of the probability that a risk will occur.An estimate of the cost and other impacts if a risk does occur.
An analysis of the likely timing of a risk.Conditions that cause a risk to become more probable.The probable losses associated with a risk or set of risks. Typically calculated as probability × impact.Estimates of risk probability, impact, timing and exposure for a set of risks.
Taking a risk after full risk management due diligence including risk intelligence, identification, analysis and treatment.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.
An estimate of both the risks and rewards of an action expressed as a ratio.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.
A common way to represent the probability and impact of a risk as a matrix.A database or list of risks.An action that is taken to manage an identified risk such as risk avoidance, acceptance, mitigation, transfer and sharing. Changing your plans to avoid a risk.The formal decision to take a risk.Actions that reduce the probability and/or impact of a risk.Transferring a risk to a 3rd party. For example, fire insurance.Sharing a risk internally. For example, pooling resources to share the risk that a single resource will fail.A plan for how you will manage a risk that actually occurs. At this point, the risk becomes an incident or issue.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.The risk that remains after your efforts to treat risk.Risks that are caused by your efforts to treat 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.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.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.The process of monitoring identified risks and risk treatment efforts.The process of communicating risk information such as current risk exposure levels.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.
This is the complete list of articles we have written about risk management.
If you enjoyed this page, please consider bookmarking Simplicable.
© 2010-2023 Simplicable. All Rights Reserved. Reproduction of materials found on this site, in any form, without explicit permission is prohibited.
View credits & copyrights or citation information for this page.