Risk management allows us to identify problems that are unknown during the start of the project, but that may occur later. Risk management is an important process that managers must maintain in an organization. Risk-taking is inevitable, and managers should have better strategies for dealing with risks. The long-term survival of an organization depends on the ability to manage risks.
The intensification of competition in global markets has forced managers to focus on maintaining a strong risk management program by establishing values. Deciding on the most optimal risk management strategy to use can be an incredibly difficult task for any manager to perform. If the manager chooses an incorrect risk management strategy, the risk event could cause substantial problems in the organization's financial and market performance. One of the most important factors that can affect the decision of which risk strategy to follow is the severity of the risk (OSBIE, 2011).
Risk management is very important in the planning and implementation of projects. Since a company plans to implement a new project, the project may face several risks. Risk management in a project of this type will involve the identification and definition of risk, the evaluation and control of the risk. Risk identification techniques help to identify potential risks to the project.
Risk control, on the other hand, uses information in the identification and evaluation of risks to mitigate them. A successful risk management program helps an organization consider the full range of risks it faces. Risk management also examines the relationship between risks and the cascading impact they could have on an organization's strategic objectives. The purpose of the risk identification step is to have a clear understanding of the potential risks of a project.
The lack of adequate frameworks to support the implementation and management of change within an organization are the main causes of the failure of many of the changes introduced by management (Burnes, 200). Change management is very important for an organization and managers must have the necessary skills to carry out this process. Therefore, if a person wants to do something independently, for example, prepare a cup of tea, a risk assessment will have to be completed to minimize the risk of that person burning themselves or other residents, such as limiting the temperature of the hot water, rather than depriving them of their independence and having us do it for them. For other industries, risk tends to be more qualitative and, therefore, more difficult to manage, increasing the need for a deliberate, comprehensive and coherent approach to risk management, says Matt Shinkman, an analyst at Gartner, who directs the company's auditing and business risk management practices.
The popular approach to measuring risk is to classify risks according to their nature and their effects on the project. Some of the approaches to identifying risks are approaches such as the risk checklist, questionnaires, analysis of financial statements, analysis of company operations, and workshops. Effective management of risks that could have a negative or positive impact on capital and profits brings many benefits. This is because it has been discovered that a comparative risk assessment is more exhaustive and rigorous and allows us to specify the details and severity of a risk event.
They believe that the context in which the risk exists is irrelevant and that the same equation can always be used to identify and manage the risk. In business risk management, risk management is a collaborative, cross-functional and global effort. Banks and insurance companies, for example, have long had large risk departments, usually led by a chief risk officer (CRO), a position that is still relatively uncommon outside the financial sector. Managing risks as opportunities arise is very important to maintaining the success of the organization.