Risk management is the process of identifying, evaluating and controlling threats to an organization's capital and profits. These risks come from a variety of sources, including financial uncertainties, legal liabilities, technological problems, strategic management errors, accidents, and natural disasters. Organizations must move at a rapid pace to address risks as they evolve, and this cannot be achieved if risk management is isolated somewhere in the back office. In addition, progressive risk management ensures that high-priority risks are treated as aggressively as possible.
In addition, risk management provides the company with a basis on which it can make wise decisions. Risk managers use their knowledge of the different types of risk, their understanding of the company's tolerance for risk and ongoing evaluations, together with workplace technology, to detect problems that could pose problems for the company. At the broadest level, risk management is a system of people, processes and technology that allows an organization to set objectives in line with values and risks. Risk management is a guide to making decisions in case of emergency and can be the “cool head” that prevails in times of stress.
Better risk management may not detect the next major disruptive event, but it can accelerate and shape a more effective organizational response to what awaits us. A risk assessment compares the estimated risks with the risk criteria that the organization has already established. These threats, or risks, can come from a wide variety of sources, such as financial uncertainty, legal liabilities, strategic management errors, accidents, and natural disasters. However, before determining the best way to manage risks, the company must locate the cause of the risks by asking the following question: “What caused that risk and how could it influence the company? For a company, assessing and managing risks is the best way to prepare for contingencies that may stand in the way of progress and growth.
A project team could implement risk mitigation strategies to identify, monitor and evaluate the risks and consequences inherent to the completion of a specific project, such as the creation of new products. The risk assessment compares the magnitude of each risk and classifies them according to their salience and consequences. While risk managers help ensure that companies comply with state, federal and global laws, risk management is not the same as compliance management. An effective risk management process will help identify which risks pose the greatest threat to an organization and provide guidelines for managing them.
