Risk management describes the process of identifying, assessing and controlling threats being posed to an organization’s capital and earnings. These threats – or risks – could originate from a plethora of sources, including financial uncertainty, legal liabilities, strategic management errors, accidents and natural disasters. This has become such a widespread issue as of late that IT security threats and data-related risks – and the management strategies to alleviate them – are considered a top priority for digitized companies. As a result, modern-day management plans have increasingly come to include companies’ processes for identifying and controlling threats to their digital assets, including proprietary corporate data, a customer’s personal identifiable information (PII) and intellectual property.
When it comes to what this type of management means for business, the bottom line is that every business and organization faces the risk of unexpected, harmful events that can cost the company money or, what’s worse, cause it to permanently close. The process of managing risk allows organizations to attempt to prepare for the unexpected by minimizing risks and extra costs – before they happen.
In a proverbial nutshell, today’s businesses are unpredictable, even volatile, and seem to become more complex with every passing day (especially taking into consideration the way modern companies have had to adapt to the coronavirus pandemic). By its very nature, it is overloaded with risk; businesses, traditionally, have viewed risk as an evil that should be mitigated whenever possible, but risk assessment provides a mechanism for identifying which risks represent opportunities and which represent potential pitfalls.
To that end, let’s take a closer look at what the management of risk process involves.
Spotting the evolving risks by studying internal and external factors that impact business objectives.
This encompasses the calibration and, if possible, creation of probability distributions of outcomes for each material risk.
Responding to Risk
After identifying and analyzing the potential risk, appropriate strategy needs to be incorporated; this can be done either by establishing new processes or eliminating them, all of which is dependent on the kind and severity of the risk.
Monitoring Risk and Opportunities
When we say “monitoring risk and opportunities,” we’re referring to the process of continually measuring the risks and opportunities of the business environment; in this process, keeping a check on management strategies performance isn’t a bad idea, either.
The management of risk, when it comes to business, is used to evaluate the business risks involved if any changes occur in the business operations, systems and processes. It identifies, prioritizes and addresses the risk to minimize penalties from unexpected accidents, by, ultimately, keeping them on track.
To learn more about compliance management, supplier onboarding management and everything related to managing risks, contact a Quantum representative.