“Risk, in insurance terms, is the possibility of a loss or other adverse event that has the potential to interfere with an organization's ability to fulfill its mandate, and for which an insurance claim may be submitted. RISK has four rules Recognize, Identify, Sequence and Keep. We have to implement these rules to reduce chances for loss or damage before it happens as precaution is always better then cure. Risk is also known as ISO31000. (IBC, 2010)
Risk management ensures that an organization identifies and understands the risks to which it is exposed. Risk management also guarantees that the organization creates and implements an effective plan to prevent losses or reduce the impact if a loss occurs.
A risk management plan includes strategies and techniques for recognizing and confronting these threats. Good risk management doesn't have to be expensive or time consuming; it may be as uncomplicated as answering these three questions:
1. What can go wrong?
2. What will we do, both to prevent the harm from occurring and in response to the harm or loss?
3. If something happens, how will we pay for it?
Risk management provides a clear and structured approach to identifying risks. Having a clear understanding of all risks allows an organization to measure and prioritize them and take the appropriate actions to reduce losses.” (IBC, 2010)
Risk Management and its techniques.
There are certain rules which we have to follow while doing any certain business or task.
1: Risk Assessment
Once risks have been identified, they must then be assessed as to their potential severity of loss and to the probability of occurrence. Therefore, in the assessment process it is critical to make the best possible decision in order to properly prioritize the implementation of therisk management plan.
2. Back up plans.
Before we can measure risk or even think to start up business or make our mind to invest on something. Every company should have some back up plans which take place if incase risk management completely fails to fulfill their plans. Back-up plans are something we have to minimize the high level risk in company and avoid any inconvenience which may cause due to any circumstances.
3. Priorities to minimize risk
Like every part of busy life we set priorities and preferences. These are set to deal with risk assessment. In business Management Company have a team member who is analysis the things and guarantee the percentage of risk which might possibly happens sometimes. For better result and longtime success before we start up with any matter we should have to distribute the tasks with their importance and ensure that they must be according to our business plan.
Competitors in markets are the main threats to any kind of business. Well company must be well in position to response to any kind of threat such as price competition, marketing of goods and manage a good fair employee policy. The threat could be intentionally targeted or it could be accidentally triggered. Threat could also be a series of small events which all add up to a big disaster so to take care of these small events we can manage or control bigger damage.
5. Competitors and response
Any competitor in market find a chance to give more tough time to your business where he find a source through which he must try to give your customers a better chance to shop.
Good companies always take threat very serious and response to them very efficiently in proper manner according to the law.
6. Track Risks and Associated Tasks
We constantly need to monitor the situation to be aware of any risk which could become threat. If the risk is more then what could be dangerous later on plan and action for it in earlier stage. Keep track of all the progress in log file or book. To make our efforts more effective we could use this continues process tracking and acting proactively. (D.Kurniawan, 2002)
7. Clarify ownership issues
In projects there are always people who have to be held responsible for different kind of risk. These people become owners of that particular risk and will be questioned for those only by doing this it makes them more responsible and alert about the system. When they will be held responsible for any risk they will become uncomfortable but as time will pass they will get through it and will make better decision as they know that if anything goes wrong they are the one who will be held for the damages. Another important effect of this step would be that managers will also start to pay attention to project especially when a lot of money will be at stake.
8. Planning Responses
The goal of risk response planning is to come up with options and plans which will allow an organization to face threats which can reduce the likelihood of the project succeeding. Even before we implement a strategy to how to make our project successful. It is responsibility of a project manager to have plans how an organization will response to any threats if anything occurs. It must be the part of project. Project manger must have in mind that their response should cover all four methods of risk management which are mitigation, transfer, avoidance and acceptance.
9. Review and evaluation of the plan
As it is very important that we must know where should our plan lies or either we have made exact plan which commit the competitors and we are giving the best to our customers. For all this sake we must review and evaluate our strategy and make certain changes which affects in terms of successful project or profit. For review the plans or project strategy company or organization has a marketing team and a project manager and it is their job. We should also access the situation or the comfort of our project by taking feedback from our customers. It is for sure that every project does involve cost and for this also organization must have specific plans which cover all hidden charge.
When all goals are set according to plan. It all now matters on that particular Company or organization that how they implemented their project. How they introduced themselves with new technology and competing market because competition is also a big risk. After careful consideration of all requirements and circumstances the point will arise that whether the people find our project as successful application as the company is expecting. For sure in implementation company must do their best to do what ever possible to avoid all sort of risks. And then they keep reviewing their strategy on daily or monthly basis. They also keep in mind that their customers must leave with positive feedback which lead them to their success.
12. Risk Avoidance
It is the most important step in risk management. It may not be always the best option to practice in business but if plays a very effective role in reducing risk. It ensures that an company does perform any activity that could become a liability to the business. Example could be if a company has computer systems and the electrical sockets and wiring are not passed by electrical engineer or technician it could cause electrical hazard even fire and could become big damage to company in future.
“Risk management is an essential component of managing a digitization project, which, if applied and employed properly, can bring excellent dividends to the project through the reduction of programmatic and technical risks. It is also a systematic process that should involve the original assessment of risks associated with the project, the implementation of changes to the plans of the project if the risks involved are too high, and the transference and mitigation of high risk areas. For those areas of risk that are acceptable it means the development of appropriate contingency plans. Risk management, however, is not an event but a process and the identification, analysis and tracking of risk should be continued throughout the life cycle of the project. (Roberto Cozatl, 2008)
However, whilst risk management is undoubtedly important in digitization projects prioritizing too highly the risk management processes itself could potentially preclude a project ever starting or completing. This is especially true if other work is suspended until the risk management process is considered complete. Therefore risk analysis should always be considered in conjunction with the overall aims of the project. If a project's value is dependent on a high level of risk then this level of risk must be considered acceptable. Risk analysis and management will always be a mixture of judgment and pragmatism.” (Zoe Bliss, 2005)
1 - Risk Management (2010) Controlling Cost. [Online].Available from: http://www.ibc.ca/en/Business_Insurance/Risk_Management/ [Accessed 5 Jan 2010]
2 - Risk Management (2010) Risk Management. [Online].Available from: http://en.wikipedia.org/wiki/Risk_management#Method [Accessed 6 Jan 2010]
3 - Risk (2010) Risk Management Techniques. [Online].Available from: http://www.sans.org/reading_room/whitepapers/auditing/an_introduction_to_information_system_risk_management_1204?show=1204.php&cat=auditing [Accessed 15 Jan 2010]
4 - Risk Management (2010) Track and Control. [Online].Available from: http://docs.google.com/viewer?a=v&q=cache:Ov8NNcD4aUMJ:www.spspro.com/brochures/guest/Risk%2520Management%2520070714%2520-%2520D%2520Kurniawan.pdf+Competitors+in+risk+management+wiki&hl=en&gl=uk&sig=AHIEtbSxxrx5C6q8tIRgnCPboLyg-j_F4w [Accessed 15 Jan 2010]
5 - Risk Management (2010) Managing risk in E-Commerce. [Online].Available from: http://www.projectsmart.co.uk/10-golden-rules-of-project-risk-management.html [Accessed 16 Jan 2010]
6 - Risk Management (2010) Risk Avoidance. [Online].Available from: http://www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES&itemId=1075386209 [Accessed 16 Jan 2010]
7 - Risk Management (2010) 10 Golden Rules of Project Risk Management. [Online].Available from: http://www.allbusiness.com/glossaries/avoidance/4949877-1.html [Accessed 24 Jan 2010]
8 - Risk Management (2010) Contingency Planning. [Online].Available from: http://ahds.ac.uk/creating/information-papers/risk-management/ [Accessed 05 Feb 2010]