The Six Steps Of The Risk Management Process

Successfully managing any type of business or organization can be risky and challenging. While some potential risks can be quite costly and time consuming when it comes to needed repairs or damage control, others can literally destroy a business. Although risk is the main cause of uncertainty in any organization, a solid risk management plan can help minimize any damage should potential risks occur. There are six simple steps in the risk management process: identify your risks; analyze the risks; control the risks; monitor those risks; improve your risk management; and report progress. The first of the six steps is identifying risks associated with in your organization. These risks can be both internal and external: economic; environmental;
Risk managers must only accept risks that have been properly evaluated and all relevant factors considered (Connor, 2010). Once a manager has gotten to this stage of the process it is important that a list of pertinent questions be written down to facilitate in the analysis. Assessments should consider the probability that a risk will happen and the consequences of the impact associated with the risk. Many will find it surprising that most risks are related to one another. Assessed risks that are medium to high should go through the risk mitigation and planning process, however, lower assessed risks may just need to be tracked and monitored. At the end of this process, a manager should have an extensive list of risk categorized by probability and level of
If a corrective action makes sense, review all possible risk reduction steps, risk transfer and insurance. An example of risk transfer is the contractual shifting of the pure risk to another party (“Risk transfer: A,”). Ensuring the business is covered by adequate insurance for all types of events, primarily catastrophic which affects the business, the customer, and the supplier. It helps to visualize the result once the control has been implemented. Sometimes when considering a control for one risk it will introduce an assortment of others. At the conclusion of this process, there should be a comprehensible picture of all relevant risks, how they interrelate, and how they can be appropriately managed. Monitoring your risks is simply having accountability of those risks and their related trends and behaviors (Krivkovich & Levy, 2013, p. 126). A manager will enforce the controls while the team leaders monitor, follow-up, or modify those controls. A skilled risk manager understands the potential risks, the effects they have on the business, and knows how to properly manage and monitor them according to the plan developed in step three of the