RISK MANAGEMENT STRATEGY
Risk Management is a strategy that is developed at a corporate level. The decision-makers of a company layout steps and procedures that are in line with company’s vision and mission. It is coupled with a high-level and grassroots level risk assessment done to analyze the present situation. review and identification of risks. The process involves setting up plans for risk monitoring and risk responses for different situations.
A corporate should identify various categories where its risk falls into:
These include the risks that originate from within the organization. Hence they are entirely avoidable with proper checks and balances. Any illegitimate operations can be avoided.
These risks are beyond the control of management and can not be avoided. An external environment like politics, economic risks, and even nature-related risks can severely affect an organization. The management needs to identify the potential risks and put plans to limit the losses due to external threats.
It is said, “You will only commit mistakes when you work”. Any operation that is carried out in an organization is bound to be exposed to certain risks. Hence the management needs to put strategies in place to avoid such situations. However, if the laid out strategies are not planned properly, the strategy could become exposed to risks.
Strategies to handle risks
“No risk, no reward” is an appropriate statement in Risk Management. Here’s how your company can treat and minimize the risks it faces.
The first rule of risk management is to assess the situation, identify the risks so that risks can be avoided altogether. Such a strategy saves the company’s bottom line and preps it well to handle the competition. Management should make the decisions that help the company avoid the risk entirely. Of course, such a strategy may not work in a situation where the risk outweighs the return. That’s when the next steps help.
Transfer the Risk
If your company is not able to handle high levels risk, the best way is to transfer it to someone who is better equipped to do so. A perfect case scenario for outsourcing.
If you can not avoid the risk altogether, try to minimize its effect to the best possible outcome. This could be done by making changes to the operation processes.
Measuring and conveying the company’s risk tolerance levels internally is essential for a successful risk management strategy.