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 them. The long-term survival of an organization depends on the ability to manage risks. Before a risk management strategy can be decided, the risk event must first be identified.
An organization must take three steps before deciding on the best risk management strategy to use. Because risk management can use a substantial amount of resources, clarifications and direction must be decided before risk management is carried out. The three factors are (Stanleigh, 201); there is also another factor that can be considered when deciding a risk management strategy, namely, the character and personality of the manager. Some managers will follow traditional methods and won't follow the advice of others, which also means that they won't be willing to adapt to a risk management strategy that they don't know, even if it's more successful.
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, 201. There are a number of steps that a risk manager must follow to successfully implement a risk management strategy). One of the most important steps in this process is to spend sufficient time identifying and evaluating the risk, so that a clear and concise strategy can be decided.
If the risk manager acts without knowledge, then he could implement an incorrect risk management strategy, wasting resources and still allowing the risk event to occur. In addition, the risk manager should try to use an avoidance strategy in most cases, predicting any likely risk event that may occur and establishing appropriate contingency plans to manage these events. However, due to a number of factors, including limited resources, a company cannot always do so, in which case it must focus on a risk management strategy that limits the effects of the risk event, rather than avoiding it entirely. Most risk events can be detected through careful planning and analysis, and some type of action can be taken to at least limit the effects of the risk event that will occur.
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 risks. On the contrary, comparative risk assessment “is a procedure used to classify risk problems according to their severity in order to prioritize and justify the allocation of resources (Hester & Harrison, 1998, p. The project planner's ability to identify risk helps identify the most appropriate approaches to managing risks. 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.
This highlights the importance of risk assessment and why it is an imperative skill that a risk manager must learn to use. This means that a quantitative risk priority method will be preferred for companies that want to prioritize risks efficiently, at an economic cost and using the least amount of resources possible. It also analyzes the different ways of mitigating risks in a project and why risk management is important in an information technology (IT) environment. There are variations of this technique, such as a bubble chart, a risk prioritization chart, an uncertainty and importance matrix, and a high-level risk model (Hopkinson, et al.
While identifying risks is an important step in managing the risks of the new project, not measuring risks can cause the process to fail. The qualitative approach to assessing risks may seem easy, but it can lead to an oversimplification of risks. The purpose of the risk management process is to identify and manage risks in such a way that the company can meet its strategic and financial objectives. Risk management goes beyond trying to avoid risks, but it is an approach that optimizes a given context despite the risks.
Therefore, it's important to consider risk management strategies when creating an initial project plan. Risk assessment and management thus help management to be prepared for any contingency or possibility. For example, the risks involved in the new project may involve resource, operational, financial or market risks. .