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Mitigating Business Risks

Risk is defined as:

“Exposure to the chance of injury or loss; a hazard or dangerous chance.”

And Risk Management is defined as:

“…. the systematic process of identifying, analyzing, and responding to risk. It includes maximizing the probability and consequences of positive events and minimizing the probability and consequences of adverse events to your organization’s objectives.”

The processes that the organization must go through in identifying risk and deciding if and how to deal with each individual risk item are:

• Planning - Process of deciding how risks will be identified, prioritized, and managed

• Risk Identification - Process of determining what risks might affect the business and attempt to document their characteristics.  This is an iterative process.  On a specific project, for example, it would never stop - the business must continue to work on identifying new risks and how those would be dealt with should they occur.

• Analysis and Response - Process of assessing the impact and likelihood of the identified risks.  Determine the evaluation process for identifying the probability and consequences of the risks.  This involves developing options and determining actions to enhance opportunities and reduce threats to your business’ on-going goals and objectives.  Really, what’s involved here is identifying ways to mitigate the identified risks as much as possible should they occur. Risk response planning must be appropriate to the severity of the risk, cost effective in meeting the challenge, timely to be successful, and realistic within the business context.

• Monitoring and Control - Process of keeping track of the identified risks, monitoring residual risks and identifying new risks, ensuring the execution of the risk planning and evaluating its effectiveness in reducing risk. Risk monitoring and control is an ongoing process for the life of whatever the current project or initiative the business is undertaking at the moment.

Summary

This is a basic summary of the general process a business should go through to identify, evaluate and plan for action on risks that can get in the way of the overall goals of the organization.  The true need to implement these processes depends a lot on your organization’s type of business that is conducted, how much downtime or loss you can weather, and how important risk mitigation is to your executive leadership.