What is Risk Management About
Risk management means that the organization:
- knows what can threaten, paralyze, or even destroy it,
- does everything possible to prevent these situations,
- knows what to do if such situations arise and how to recover as effectively as possible.
Knowing the risks and being able to avoid them is one of the basic elements of the instinct of self-preservation. Risks are obstacles that stand in the way of your goals.
Why Risk Management is Important and Useful
- Risk management should ensure that the organization can either prevent dangerous, hazardous or crisis situations or be adequately prepared to handle them.
Managing risks means increasing business resilience to problem situations
Managing risks involves identifying potential threats or problematic situations. The primary goal is to enhance the organization’s resilience, making it better equipped to handle various adverse events.
Key Aspects of Risk Management
- Awareness: The organization must recognize what is crucial for its operations.
- Preventive & Corrective Measures : Implement necessary and proportionate measures to prevent or mitigate risks.
- Reactions: People know what to do in the case of negative event
- Recovery: In case of negative events, the organization should be able to recover effectively and return to normal operations.
This approach ensures that businesses can navigate challenges effectively and maintain stability even during difficult time
What are risks?
Risks are potential problems that may or may not occur. They are situations that can put an organization at risk and risk management therefore helps to prevent, mitigate or prepare for these situations. If you have a plan for what you will do about them, you will be better prepared for them. So risk management in a practical sense should be a natural part of planning and managing a company, it's not some disconnected set of spreadsheets.
- You can never estimate all the risks, no matter how hard you try
- Some risks you can influence, others may occur without your influence
- Risks change over time
What is risk management process?
Risk management is a continuous process, consisting from 5 basic steps
- Identification of risks
- Risk assessment
- Selection of priority risks
- Risk treatment
- Reassessing the situation
The entire process is continuously iterative, just like managing a business, ensuring that all current risks are identified and allowing you to respond effectively to the actual situation. Risks must be continuously monitored, reassessed and treated. Like other plans, they are set once in a while and constantly adjusted according to the situation. Risk management works in a similar way. Reassessment typically has an annual cycle.
How to Implement Risk Management in a Company
Risk management as a continuous process begins with identifying risks, followed by their analysis, evaluation, prioritization, and subsequent decisions on how to handle and address each risk. Essentially, the entire risk management process is a constantly repeating cycle, similar to strategic planning. This cycle typically repeats annually.
Implementing a risk management system means you need to:
- Have an overview of risks and their sources
- Understand their impacts on your company
- Select the risks that most threaten your operations and try to mitigate or prepare for them
- Regularly reassess the situation
Risk management can be implemented across the entire organization or within specific areas
Organizations typically focus on risk management in critical areas, particularly those involving key processes. Information security and cybersecurity are common starting points for risk management initiatives. Before beginning risk analysis, it is essential to define the scope of risk management. Common areas include:
- Company-wide risk management
- Workplace safety risks (OHS)
- Financial risks
- Information security risks
- Cybersecurity risks
- And more
Risk Register is a Cornerstone
To ensure all these risk management activities and processes, you need a space where you can store and share this information, ensuring continuous improvement of your processes. You can conveniently perform all the mentioned steps in risk management using Aptien, which allows you to:
- Develop a risk catalog (register, list) where each individual risk is described using a risk card.
- Maintain all risks in the risk catalog, where you evaluate them and keep detailed information about the risk, its source, impacts, probability, and other related details.
- Keep information about risk sources and their contexts.
- Manage the implementation of measures.
- Regularly evaluate risks.
Step 1: Identify Risks Threatening your Company
The first step is to compile a list of potential risks that could threaten your organization. Utilize methodologies such as asset-based, process-based, or threat-based analysis to create this list. Record the results in a risk catalog.
Step 2: Assess and Evaluate Each Risk
Once the risk list is prepared, evaluate each risk individually. Risk assessment often occurs concurrently with the creation of the list. For each risk, create a separate risk card that includes detailed information such as impact, probability, and subsequent measures to treat or mitigate the risk. Maintain the risks in the catalog with contextual information, linking each risk to its associated asset—whether it be a project, property, process, or other assets—and noting who is responsible for managing each risk.
Step 3: Prioritize, Focus those Risks that Threaten you the Most
For risks, you set up your risk map, where you can prioritize and monitor risks according to the defined zones in the risk map. Click on the desired zone and the risks are filtered according to the criteria you set.
Step 4: Create and Manage Measures
For selected risks, you create corrective actions in a separate corrective or preventive action organizer. For each measure, you create a separate record on which you keep detailed information and use assigned tasks to manage and control work on them. You keep risks and their measures in context, i.e. you know which risk is associated with which measure and who is responsible for which measure.
Step 5: Stay Updated and Reassess the Situation
- The situation is constantly changing over time.
- New risks arise and the original ones may disappear or their impact or probability of occurrence may change.
- This must be taken into account and at least once a year the risks must be reassessed and the subsequent measures taken with them.
- Continuous monitoring and evaluation of the state of risks is therefore important. Evaluating measures, reporting significant risks and measures to eliminate or mitigate risks. This can be done in different ways. Formal evaluation takes place in the form of audits, from which suggestions for improvement or re-evaluation follow.
