Risk Management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events..[1] Risks can come from uncertainty in financial markets, project failures, legal liabilities, credit risk, accidents, natural causes and disasters as well as deliberate attacks from an adversary. Several risk management standards have been developed including the Project Management Institute, the National Institute of Science and Technology, actuarial societies, and ISO standards.  Methods, definitions and goals vary widely according to whether the risk management method is in the context of project management, security, engineering, industrial processes, financial portfolios, actuarial assessments, or public health and safety.

For the most part, these methodologies consist of the following elements, performed, more or less, in the following order.

1. identify, characterize, and assess threats
2. assess the vulnerability of critical assets to specific threats
3. determine the risk (i.e. the expected consequences of specific types of attacks on specific assets)
4. identify ways to reduce those risks
5. prioritize risk reduction measures based on a strategy

The strategies to manage risk include transferring the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk.

What is Risk?

“Risk” is defined as anything — good or bad, big or small — that could prevent the achievement of a goal. Risk is a natural part of life and though we can list, measure and mitigate it, we can never completely eliminate risk. We deal with risk every day in our private lives. Groups of people, however, need a formal process to deal with the risks they face, and the term ”risk management” is used to refer to the various practices an organization uses to manage risks.

Basics of Risk Management

The main principle behind any type of risk management is to recognize and minimize the upcoming problems, so as to decrease the losses that will be incurred in the near future. Risk management can be either continuous or non-continuous. In the former case, assessment of risk is done continuously, from the start of a project till its completion; whereas in the latter one, risk assessment is usually done only once during the initial stages of the project. Following basics are covered in a risk management program.

Reviewing Previous Data: Reviewing work or previous operations is applicable while assessing risk for private companies. The risk management committee analyzes the official data of the previous years, so that they can understand the company profile, and the current terms and policies of the company.

Identifying Potential Risk: Risk identification is an essential step in management of risk. In this stage, as the name suggests, the risks are identified and named. While identifying the risk, it is obvious that the sources of the risk are also examined in order to analyze the possible impact(s). The risk management team can compare the standard risk lists in relation to the particular project.

Assessing Risk: Risk assessment is done in terms of probability ratio. The probability of the risk should be greater than zero, otherwise there are no chances of the risk occurring. In other terms, if probability is usually less than 100, then uncertain problems may occur. If the probability ratio is 100, then the risk is referred to as an issue that is handled under issue management. Risk can also be assessed in terms of scale viz. low, medium, high and critical. Though, people think mostly about the negative impact of risk management, there can also be a positive impact.

Monitoring and Controlling Risk: After assessment of risk, there are four strategies that can be implemented; avoiding the risk (changing the plan), transferring the risk (to someone more responsible to handle it effectively), mitigating the risk (doing something to minimize the impact) or accepting the risk (applicable if the risk is negligible). By controlling the risk, we mean to assess the ongoing project and check for any new risk (if present).

To be precise, risk management is keeping control over the risk. Hence, it is quite possible that an organization may suffer losses, even after risk management. Managing risk is not a difficult task, rather we can call it a crucial job. It should be conducted by professionals, who are experienced enough to bring forth ideas and promote practices for the benefit of the organization. In a company, the project manager usually handles the management of risk. Risk management, if not done properly, can lead to loss of opportunities and/or business. If you have a deep interest in managing and solving problems, then risk management can be a rewarding and satisfying profession. Nowadays, there are certain schools that offer risk management courses.

Risk Management in Today’s Business World

Risk Management Cycle

Successful business people are characterized by a need to know and a need to adapt. Because business trends across the world are constantly evolving and adapting to match the latest economic crisis or the latest technological advancement, smart business people do their research and known what is happening at any time and any where. However, it is surprising to note that businesses across the world are in a constant struggle to control the risk management in their business.

For instance, did you know that businesses around the world will create over 7.5 billion electronic documents this year alone? While these statistics are startling, it is even more shocking to note that up to 80% of these electronic documents are not safeguarded under an appropriate risk management program. In today’s world of litigation and lawsuits, it is important and even vital to your business to protect your ‘risky’ documents created throughout the history of your business.

There are a number of things to consider when planning out your business’s risk management strategy. Keep the following in mind:

* Consider implementing a software system that is both functional and practical for your specific business needs. Let’s face it, not all businesses are created equal. Do not buy risk management software that pigeon holes you into a way of business that simply is not “you.” Work to find risk management software that adapts to your business, not the other way around.

* Choose a software system that allows you to continue working the way you always have. If your employees are forced to change their work habits and learn an entirely new system, chances are that all of your efforts towards risk management will go down the drain. Of course, the software will have to be installed and some basic training needed to take full advantage of all it has to offer, but you should still able to use the same word processing tools to create and share corporate documents—email and Microsoft Office applications are among the most common.

* While this risk management software should not change the way your work, it should change the results and efficiency of the way you work. For instance, some risk management software companies like NextPage include options for document collaboration and document retention. With this software your employees will be able to work together on a whole different level of efficiency and quality while still complying with the latest document retention policies.

* Look for risk management software that gives you the power to archive, track, and purge risky documents. The most advanced software will allow you to track your electronic documents from start to finish, also allowing you to see different versions and where these versions are located and stored (i.e. in personal email or on an employee’s desktop computer). In order to further risk management, this software will also allow you to archive your risky documents for safe keeping and gives you the power to order a purging of all documents when the need arises.