The term risk management simply means the identification, assessment, and control of risks that inevitably come up in an organization and the decisions that are made to strike a balance between costs and the risks. This article looks closely at this term to help you get a better understanding of it.
When you acknowledge the fact that the occurrence of a disaster be it natural or otherwise is a possibility in an organization, then it is an admission that a risk exists in the business. The process and steps that you take to determine the extent of the risk, and the action taken to curb same to a level that can be described as manageable is what we call risk management.
The above rather lengthy explanation clearly shows that every one of us practice this management regularly. A good instance is when you take the precaution of bringing along an umbrella when a possibility of rainfall is mentioned in the weather forecast or buying car insurance in case you are involved in an auto accident.
The sum total of all these explanations goes thus – risk kind of management is the ability of an individual to recognize the possibility of a misfortune befalling their best interests, and therefore take appropriate measures to forestall it or whittle down the effect they might have.
And in order to protect our interests from destruction we unwittingly employ one of the golden rules of effective risk management- we realize that it is far more cost effective to invest in precautionary measures than it would be to ignore the potential risk and pay dearly for the negligence.
The way people approach this management depend on a lot of factors, because the risks associated with businesses and projects differs significantly. Therefore you should expect the style used to identify and clarify the possible outcome as well as the how the risks will be managed to be different.
One lesson you should learn from the above is never to make the mistake of use one risk management approach of a certain project for other projects. So your policy is to always adopt a fresh approach to any new project.
Folks who are career risk manager will readily attest to the fact that experience plays a huge role in how risks are identified and analyzed, as well as the way these management policies are implemented. This is why seasoned and brilliant risk managers are most likely to spot shortcuts in how companies will generally approach the management of risks.