Definition

It is defined as a process involving business practices that identify, evaluate and prioritize the various forms of risk.

Once managers identify risks, they can plan strategies to eliminate negative impact of risk on the business. Strategies vary according to the form of risk, which further differ depending on the type of business. In addition to this, managers have to keep standards for risk management in perspective. These standards are best practices developed by:

• The Institute of Project Management

• The National Institute of Science and Technology

• The ISO – International Organization of Standardization

• Other regulatory organizations

Forms of Risk

Risks include occurrence of unexpected and expected events and lapses in best practices. They can be physical in nature, such as fires, natural disasters and other forms of accident. Risks can also be legal issues involving sexual harassment, theft, fraud and racial discrimination. They can also be related to unpredictable financial markets, credit risks, failures in projects and problems with data management.

Objectives of RM

The objective of compliance with risk management is to guard the business. Businesses are always vulnerable. In order to ensure continuity of the business and to reduce financial risks, managers need to protect the business continuously. In addition to this goal, RM is meant to assist managers to protect their employees. Managers also have to make sure that customers and the general public are not compromised. This also provides best practices to preserve records, data and other physical assets of the company.

Identifying and Managing Risk

Risk can be identified and manages in five simple steps.

1. Define and identify risks
2. Assess the information related to the threat imposed towards assets
3. Predict consequences of the threat
4. Establish the measures to be takes to reduce the risk
5. Prioritize the management procedure to be followed stepwise to mitigate the risk

Strategies for Managing Risk

There are four categories of strategies for risk management:

• Accept the consequences and budget for the loss

• Transfer the risk to another aspect of the business

• Close down the high risk regions of the business

• Install back-up plans for foreseen risk scenarios

Every business must have plans to ensure risk management through compliance. This helps protect financial and physical assets.