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Risk is defined as the possibility of an event that could lead to disastrous consequences, and risk management is the practice of using methods, tools and strategies to manage and implement counter measures to fight and/or avoid these risks.
Risk management focuses on protecting your business by understanding the possibilities that could go wrong, evaluating the risks that can be dealt with and implementing strategies to work on fixing them.
That said, every business faces risks that could present threats to its success. As businesses grow and become more successful, they become more exposed to several catastrophes that can harm their future existence. Therefore, it is critical that you defend and protect the growth of your business from all potential threats and risks.
However, this isn't something that you need to worry about. It is rather something that you must plan for. Here are some proven methods to help you through the process:
How to identify risks?
There are multiple sources of risks. They may come from within the project or from outside. To be able to successfully identify the risk, one has to:
Risk identification is an iterative process. If used accurately, this process can help in early and continuous identification of events and their impacts on the project's performance, capability, outcome and goals.
Once you have identified the risks that you may face, you then need to estimate the likelihood of these threats turning into reality and their possible impact. However, before you rush into doing that, it is suggested that you gather all relevant information that will help you accurately estimate the probability of the occurrence of the event and the associated costs. Past data can also be used as reference guides if there are no accurate means of forecasting.
How to analyze the different types of risks?
All risk management processes follow the same basic steps to protect the business. However, before we reach that stage, it is important to analyze and evaluate the risks and possible threats that we might face. Here are some of the factors that you’d like to consider:
Aside these, some other risks that must also be kept in mind while analyzing include environmental risks, employee risk management, employee safety, political and economic instability in (domestic or foreign) markets that you export to, health and safety, procedural failures, project issues, technical issues, natural disasters and structural issues.
How to protect your business from the risks?
Risk is all about uncertainty that can be effectively de-risked if a framework is put around it. And that means you can move much more confidently towards achieving your project goals. It is always a great idea to search for approaches that are cost-effective for eliminating a risk than the cost of the event if it occurs. Here's how you can go about it…
However, it is important that you understand that when you avoid a potential risk entirely, you are also losing out on a potential opportunity.
However, do make sure that you fully understand the impact before taking any steps.
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