the importance of risk management
TRANSCRIPT
The ImportanceRisk Management
A company’s success is mainly based on its preparation
for opportunities and challenges that will inevitably arise
throughout time. That’s why implementing effective risk
management strategies is such an important factor to
consider when running your company. Risk management
will help you hone in on your company’s strengths and
weaknesses; this kind of information is invaluable and in
the longrun will always help you solve problems,
mitigate risk, and achieve proposed goals.
The way risk management typically works is first, by
creating a list of internal and external risks. You can
categorize risk by its probability of occurrence, potential
impact, and/or proposed actions. You can also classify
risk by levels: low, moderate, and high. Low risk events
are known for having little to no impact on costs,
schedule, or performance.
Moderate risk events tend to have some impact on cost,
some disruption of the schedule, and/or some decline in
performance. High risk events are the ones you definitely
want to watch out for as they cause significant changes
to the budget, the timeline, and performance.
Once risks are identified and broken down into
categories, a risk management plan is put into place and
communicated to the company’s members. An effective
plan should contain achievable expectations and goals. It
should include an array of strategies that the company
can utilize when challenges arise. In other words, a solid
risk management plan should ensure that the company
will run smoothly even when it is met with obstacles
along the way.
Aside from mitigating risk, risk management can unleash
a domino effect of many positive factors for your
company. When you minimize and eliminate negative
risks, you make room for goals to be completed on time,
or even ahead of time. Avoiding schedule delays can
translate into being able to meet your budget and not
have to spend unnecessary capital in lastminute issues.
Therefore, while you minimize your expenses on one
end, you have a great opportunity to maximize your
profits on another. Turning profit can also help elevate
your company’s performance to another level. You will
have time to prioritize and actually think of different ways
you can be improving your product or service. This kind
of analysis will not only boost your company, but it will
also strengthen you as an effective leader.