The Importance of Risk Management

The risk management position is currently one of the most well-respected positions in firms and companies, and for good reason. From working within a risk management structure from a corporate lens, I feel as if I have grown as the businesswoman I am and the one that want to be. Risk management is an important part of planning for businesses. The process of risk management is designed to reduce or eliminate the risk of certain kinds of events happening or having an impact on the business.

According to a new survey conducted by an advisory firm, risk is defined as:

“Organizations face internal and external actors and influences that make it uncertain whether, when, and the extent to which they will achieve or exceed their objectives. The effect this uncertainty has on the organization’s objectives is risk.”

After the economic collapse in 2008, companies have a renewed focus: to manage risk and to analyze potential outbreaks to better forecast for the future. Risk is the main cause of uncertainty in any organization. Therefore, companies increasingly focus more on identifying risks and managing them before they even affect the business. The ability to manage risk helps companies act more confidently on their current and future business decisions. A risk management knowledge of the threats and opportunities that companies may currently or potentially face gives the company leadership various options on how to deal with potential problems and act before they ever arise.

Risk can be caused by internal and external sources. The external risks are those that are not in direct control of the management. These include political issues, exchange rates, interest rates, and so on. Internal risks, on the other hand, include non-compliance or information breaches and operational risk among others. Recently, many companies have added risk management departments to their team. The role of this team is to identify risks, come up with strategies to guard against these risks, to execute these strategies, and to motivate all members of the company to cooperate in these strategies. Larger organizations generally face larger risks, so their risk management strategies also need to be more sophisticated.

Risk management is important in an organization because without it, a firm cannot possibly define its objectives for the future. Effective risk management strategies allow you to identify your company's strengths, weaknesses, opportunities, and threats. By planning for unexpected events, you can always be ready to respond if they arise. To ensure your company's success, always be able to how you will handle potential risks so you can identify, mitigate or altogether avoid problems when you need to do. Successful senior leadership structures recognize that risk management is important; because achieving a company's goals depends on planning, preparation, results and evaluation that contribute to achieving overall industry strategic goals.

Also, every risk management team is responsible for assessing each risk and determining which of them are critical for the business. The critical risks are those that could have an adverse impact on the business; these should then be given importance and should be prioritized. The whole goal of risk management is to make sure that the company only takes the risks that will help it achieve its primary objectives while keeping all other risks under control.

Overall, risk management identifies what can go wrong, and takes steps to reduce the probability of or lessen the impact of risks on your project’s quality, cost and schedule. It’s better to find the problem before it finds you.