The Steps Involved In Risk Management

The Steps Involved In Risk Management

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When starting any kind of business, it usually is a gamble and there are risks involved since you are not entirely assured of reaping benefit from the business completely. If the business by any chance involves other people, their losses may become a big deal as you are liable to them since you run the organization. For this reason, the types of risks that one is likely to encounter become the major drive of how decisions are made in an organization. However, not in all cases are risks understood and this could mean that the risks are potential hazards for the firm. In order to obtain success, you need to be able to manage the risks as the come and below are steps on how to manage risks. 

First of all, you need to establish and define your goals and gaining planning approval. This translates to knowing exactly what company aims to achieve. With this information, the risk becomes defines as the objectives are set. The organization’s risk management team is required to be able understand exactly how the organization operates so as to be able to get to manage the risks on both the operational and strategic level. Afterwards, the next process would be to identify the risk which on its own is another task which involves systematically scrutinizing situations and finding solutions. Not all the identified risks are on the same level and therefore they will have to be arranged in order of importance. 

In a business setting such as town planning Stonnington, the kinds of risks that are likely to be encountered are either financial, physical, ethical or legal. The physical part is basically in relation to the physical assets of the firm such as buildings and land whereas the financial part would mainly be money related. On the ethical side, the risk may be something that is of potential harm to the reputation of the organization while the legal ones could be due to breach of contract of duty. After identifying the risk, they are required to be analyzed in order to determine and address the effect of the risk which could range from extreme to high to moderate and lastly to low.

Evaluating the risks would follow whereby you get to understand the losses that could arise from the risk, the opportunities brought about by the risk and the extent to which you can control the risk. With this information you can then decide how you will treat the risk like for example you could decide to avoid it, reduce the risk, share it or retain it. When you do not really understand the extent of the risk, it is always best to just take your time and investigate more on the concept before making a final decision.

The final step involves monitoring the effective of the risk management. For every person and organization, the goal is usually to be able to reduce risk and increase profits. Reducing risks does not come easy as it involves the constant monitoring of business activities and trying to make parallel the organizations policies and its structures. The processes of managing risk are kind of similar but differ in what they entail because of their differences in what they actually do. For example managing risk in a self managed super fund organization may be different with how it is done in a planning organization and this is why you need to have the goals stated clearly at the start of each process.

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