Risk management is the process of identifying, evaluating and controlling threats to an organization's capital and profits. These risks come from a variety of sources, including financial uncertainties, legal liabilities, technological problems, strategic management errors, accidents, and natural disasters. Risk management encompasses the identification, analysis and response to risk factors that are part of the life of a company. Effective risk management means trying to control, as far as possible, future results by acting proactively rather than reactively.
Therefore, effective risk management offers the potential to reduce both the possibility of a risk occurring and its potential impact. A BoardEffect board management software program is your best defense for keeping board matters private, including risk management plans. In such a case, the company doesn't usually experience many surprises, because the focus is on proactive risk management. In addition, risk management provides the company with a basis on which it can make wise decisions.
Essentially, the goal of risk management is to identify potential problems before they occur and to have a plan to address them. Risk management teams tend to think of the risk analysis process as a type of problem-solving exercise. Risk management is the ongoing process of identifying, analyzing, evaluating and treating exposures to losses and monitoring risk control and financial resources to mitigate the adverse effects of losses. The key to an economic and efficient risk program is to control risk management functions with the guarantee that the actions taken are desirable, necessary and effective to reduce the total cost of operational risk.
This is necessary for the risk management process to fit with other systems, such as organization, planning, budgeting and cost control. Risk mitigation is the process of reducing risk by reducing the impact of the risk if it occurs or reducing the likelihood that it will occur. In addition, progressive risk management ensures that high-priority risks are treated as aggressively as possible. Risk management is important during project initiation, planning and execution; well-managed risks significantly increase the likelihood of project success.
The University of Waterloo has a risk management policy, Policy 11, which requires each of us to evaluate, monitor and report institutional risks. Risk management is an important process because it provides the company with the necessary tools so that it can identify and adequately address potential risks. A good risk management structure must also calculate uncertainties and predict their influence on a company.