What is Risk Management?

What is Risk Management About

Risk management means that the organization:

1. knows what can threaten, paralyze, or even destroy it,
2. does everything possible to prevent these situations,
3. 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.

What Risk Management Means for Growing Businesses?

• Risk management helps ensure that your business can either prevent dangerous or crisis situations or be ready to handle them effectively.

Managing Risks Means Building Business Resilience

Managing risks means identifying potential threats or challenges. The main goal is to strengthen your business’s ability to handle tough situations and bounce back quickly.

What are Key Aspects of Risk Management

• Awareness: Understand what is critical to your business operations.
• Preventive & Corrective Actions: Take the right steps to prevent or reduce risks.
• Response: Ensure everyone knows what to do if something goes wrong.
• Recovery: Be prepared to recover quickly and get back to normal after a setback.

This approach helps businesses face challenges head-on and stay stable even during difficult times.

What Are Risks?

Risks are potential problems that may or may not happen. They are situations that could threaten your business, and risk management helps you prevent, reduce, or prepare for them. Having a plan makes you better equipped to handle these risks. Risk management should be a natural part of your business planning—not just a set of disconnected spreadsheets.

• You can’t predict every risk, no matter how hard you try.
  
• Some risks can be influenced; others happen beyond your control.
• Risks change over time.

What Is the Risk Management Process?

Risk management is an ongoing process made up of 5 basic steps:

1. Identify the risks
2. Assess the risks
3. Prioritize the risks
4. Address the risks
5. Reassess the situation

The process is continuous—just like running a business. It helps you spot new risks and respond to changing situations effectively. Risks need to be regularly monitored, reassessed, and managed. Like other business plans, risk management is reviewed and updated periodically, often on an annual basis.

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.